Tether announced a new investment strategy focused on Bitcoin (BTC), the largest cryptocurrency by market capitalisation. Starting this month, the firm will regularly purchase BTC using a portion of its profits. It plans to allocate up to approximately 15% of its realised investment profits, excluding unrealised price appreciation, for the BTC purchases to add to its reserve surplus. It will handle the custody of the BTC without relying on third-party custodians.
Tether recently disclosed that it holds $1.5 billion worth of BTC and $3.4 billion worth of gold as part of its asset reserves backing USDT and smaller stablecoins. Cash and cash-like assets, including U.S. Treasury bonds, account for about 85% of its reserves, according to the 2023 Q1 attestation. Stablecoins, valued at $131 billion, have become a critical component of the crypto ecosystem, facilitating seamless trading and transactions between fiat currencies and digital tokens by pegging their value to an external asset, typically the U.S. dollar.
The goal of Tether’s BTC acquisition campaign is to strengthen and expand its stablecoin reserves while capitalising on the potential investment value of BTC. Paolo Ardoino, the Chief Technology Officer of Tether, highlighted Bitcoin’s resilience and long-term store of value with significant growth potential. He noted that investing in Bitcoin not only enhances their portfolio’s performance but also aligns them with transformative technology.
Tether clarified that only realised profits from its investment operations would be used to purchase BTC, disregarding unrealised capital gains. The firm considers actual gains based on the difference between the purchase price and net proceeds from asset sales or reimbursed amounts in the case of maturing assets like Treasury bills. Tether also focused on developing communication systems, energy solutions, and Bitcoin mining infrastructure as part of its smaller investments.
Although Tether has come up against criticism for its lack of transparency and controversial investment decisions, its flagship token USDT emerged as a safe haven during the U.S. regional banking crisis that affected Circle’s USDC stablecoin. Tether maintained price stability due to its perceived independence from U.S.-based banks and its incorporation in the British Virgin Islands and Hong Kong. While many competitors experienced outflows, USDT’s circulation grew by 24% this year.