Tether announced its intentions to invest 15% of its net profit into Bitcoin to “diversify” its reserves The investment amounts to approximately $222 million USDT ...
Crypto giant Tether said on Wednesday, May 25, it plans to regularly invest 15% of its net profit into Bitcoin (BTC) as it wants to diversify the reserves that back its USDT token.
Tether’s move toward Bitcoin could boost a supply squeeze, potentially causing an increase in the price of the major crypto. This could be crucial in bringing the market out of its current slump.
Tether has recently announced that it will be regularly setting aside up to 15% of its profits towards investing in Bitcoin.
This move is aimed at growing and diversifying the company’s reserves while keeping their Shareholder Capital Cushion intact. The equity or shareholders’ funds in a business are often referred to as the ‘equity cushion.’ The idea is that if the company has big losses, the equity cushion would protect the other sources of funding.
Currently, Tether holds around $1.5 billion in Bitcoin, as confirmed in their Q1 2023 Assurance Report.
Recently, a Tether spokesperson made a statement that cleared up some confusion about the company’s Bitcoin purchases. The spokesperson explained that in the grand scheme of things, the Bitcoin the company buys is only a small part of its overall profit. A bigger chunk of their extra income goes towards covering business expenses, including things like bank fees.
“The aim is to keep the Bitcoin portfolio value well below the size of our total excess reserves that accounted for 2.48B at the end of Q1/2023, while Bitcoin holdings accounted for 1.5B,” the Tether spokesperson said.
The current CoinMarketCap of Tether ranking is #3, with a live market cap of $83,066,737,101. A high market capitalization implies that the asset is highly valued by the market. It also boasts a 24-hour trading volume of $24,318,982,089 USD.
This is one of the highest transactional data on the CoinMarketCap list, and compared to Bitcoin, which has a volume of $15,8 billion – it shows the stablecoin’s evident dominance.
Still, Tether focusing on Bitcoin, as such an influential player, can only be good for BTC price.
According to the company, it has recognized the impressive performance of Bitcoin as an investment over the past decade, which has caught the attention of major financial institutions. This notable history has solidified Bitcoin’s position as a crucial component in a diversified investment portfolio.
Therefore, Tether intends to take advantage of the potential growth of Bitcoin by adding it to its investment strategy.
Paolo Ardoino, CTO of Tether, commented that the decision to invest in Bitcoin was underpinned by its strength and potential as an investment asset.
“Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favored choice among institutional and retail investors alike”.
“Our investment in Bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology that has the potential to reshape the way we conduct business and live our lives,” Ardoino stated.
Last month, the Standard Chartered analyst Geoff Kendrick made a bold claim about Bitcoin, calling it “decentralized, scarce and trustless.” He said that the failures of Silicon Valley Bank and other American lenders have strengthened the argument for Bitcoin being a reliable and limited digital currency.
“This, coupled with a stabilization of risk assets and speculation that the Federal Reserve will ease monetary tightening further, means the “pathway to the USD 100,000 level is becoming clearer,” Kendrick said.
Proponents of Bitcoin maintain that digital currency is an asset worth diversifying into in times of economic distress. As the theory goes, Bitcoin has a limited supply of 21 million Bitcoins, meaning it should appreciate as demand for alternative assets grows to avoid the effects of high inflation. The cryptocurrency failed that test last year when it plunged 65%, marking the second-worst year for Bitcoin of all time amid a tumultuous backdrop of multibillion-dollar flameouts such as FTX and Terra and regulatory clampdowns.
However, the token has been climbing more recently, suggesting a recovery may be on the cards.
The stablecoin market is on downhill for the 14th consecutive month, which is a sign of capital leaking out of the crypto space, and a disturbing trend for the crypto recovery.
The stablecoin was recently accused of its lack of transparency about its reserves and controversial investment decisions.
However, in March, during the banking crisis in the United States, which hit Circle’s USDC, the second largest stablecoin – Tether’s USDT emerged as a safe investment option.
By committing to invest in Bitcoin regularly, Tether shows it believes in this cryptocurrency that probably will lead to a rise in its (BTC) price (quote analysts)