Tether, the prominent cryptocurrency firm, declared its intent to acquire a substantial quantity of bitcoin, in the hundreds of millions of dollars range, with the aim of supporting the world's leading stablecoin.
The company plans to utilize 15% of its net earnings to invest in Bitcoin, in a bid to diversify the reserve assets supporting its USDT token. The primary objective is to maintain the token's 1-to-1 peg with the U.S. dollar.
This endeavor will approximately result in an investment of $222 million, as per Tether's most recent attestation report, detailing the composition of its USDT reserves, along with surplus reserves and profits.
A representative from Tether emphasized that the purchased Bitcoin will represent a minor portion of the overall net earnings, as a significant portion of the excess income is allocated to business operations, inclusive of banking fees.
"The goal is to maintain the value of the Bitcoin portfolio significantly below our total excess reserves, which stood at 2.48B at the end of Q1/2023. Our Bitcoin holdings amounted to 1.5B," added the Tether representative.
According to CoinGecko data, USDT stands as the largest stablecoin in circulation, with a supply exceeding $82.8 billion. Its key competitors include Circle's USD Coin and Binance's BUSD.
Traders predominantly use stablecoins to transition between various cryptocurrencies without needing to revert to fiat currencies.
Tether CTO Paolo Ardoino asserted in a statement, "Our decision to invest in Bitcoin, the world's premier and largest cryptocurrency, is grounded in its investment potential and robustness. Bitcoin has consistently demonstrated its durability and emerged as a viable long-term asset with remarkable growth potential. Its limited supply, decentralized operation, and widespread adoption make Bitcoin a popular choice among both institutional and retail investors."
The proposed action would solidify Tether's position as a significant Bitcoin holder – the company currently possesses over $1.5 billion worth of Bitcoin in its balance sheet. This follows similar strategies adopted by notable investors like Paul Tudor Jones and MicroStrategy CEO Michael Saylor, who have amassed substantial Bitcoin reserves, viewing it as a hedge against currency devaluation and inflation.
Tether's strategies to sustain its token's value at $1 have historically sparked controversy due to doubts about the quality of its reserve assets. The company held a significant part of its reserves in commercial paper in the past - a less secure form of short-term, unsecured corporate debt. In an attempt to placate investor worries, Tether transitioned from commercial paper, replacing these funds with solely U.S. government debt securities.
