- Tether will start buying Bitcoin
- Tether will allocate approximately 15% of its profits from investments to buy BTC.
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Stablecoin issuer Tether announced today that it will buy Bitcoin. But how will it do it?
Tether Will Invest in Bitcoin!
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Stablecoin issuer Tether announced today that it will regularly buy Bitcoin (BTC) for its stablecoin reserves, using a portion of its profits starting this month as part of a new investment strategy focused on the largest cryptocurrency by market value.
Tether has decided to strengthen its reserves by buying #Bitcoin with its net operating profit.
— CO NEWS (@coinotag) May 17, 2023
Tether said it will allocate approximately 15% of its profits from investments to buy BTC for its stablecoin reserves, excluding unrealized price increases in reserve assets, and add the tokens to its reserve surplus.
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The company said it will store its BTC without using any third-party custodian.
The move comes after Tether, the company behind the largest stablecoin in the market, USDT, announced last week that it holds $1.5 billion in BTC and $3.4 billion in gold among the assets supporting USDT and its smaller stablecoins. According to Q1 2023 data, about 85% of the reserves are held in cash and cash-like assets such as U.S. Treasury bonds.
Stablecoins, currently a $131 billion asset class, have become an important building block of the crypto infrastructure, facilitating trade and transactions between fiat currencies and digital tokens by pegging their prices to an external asset, typically the U.S. dollar.
The company said in a press release that its BTC buying campaign aims to strengthen and diversify its stablecoin reserves while benefiting from price appreciation as an investment.
Tether’s chief technology officer, Paolo Ardoino, said in a statement, “Bitcoin has consistently proven its resilience and emerged as a long-term store of value with significant growth potential.”
The company said it will use only profits from investment activities to buy BTC, disregarding unrealized capital gains. This means the company takes into account only “tangible gains from its operations,” which consist of the difference between the purchase price and the amount paid back when selling an asset, such as when maturing assets like Treasury bonds.
Tether also said it is focusing on developing communication systems, energy, and Bitcoin mining infrastructure among its smaller investments.
Tether has been criticized for years in the crypto industry for its lack of transparency regarding its reserves and controversial investment decisions.
However, the company’s stablecoin, USDT, emerged as a safe haven after the March banking crisis in the U.S. hit Circle’s second-largest stablecoin, USDC. Silicon Valley Bank’s sudden collapse caused a portion of USDC’s cash reserves to freeze in the bank over a weekend, and several stablecoins temporarily lost their dollar peg in a chain reaction.
Tether emerged as a clear winner in maintaining price stability due to the perception that it is disconnected from U.S.-based banks in the British Virgin Islands and Hong Kong.