Tether Strengthens Stablecoin Reserves with BTC Investment

Tether, the stablecoin issuer, plans to buy Bitcoin to strengthen reserves and capitalize on its growth potential.

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  • Tether has made a groundbreaking announcement about its investment strategy.
  • BTC has taken center stage as Tether has revealed plans to purchase the cryptocurrency regularly.
  • Tether has allocated profits and has chosen to self-custody the acquired BTC.

Tether, a prominent stablecoin issuer, has unveiled a new investment strategy to bolster its stablecoin reserves with Bitcoin (BTC), the leading cryptocurrency in market capitalization. The company announced on Wednesday that it would begin purchasing BTC regularly using a portion of its profits starting this month.

In this investment initiative, Tether intends to allocate up to approximately 15% of its realized profits from investments, excluding any unrealized price appreciation of its reserve assets, for acquiring BTC. These newly acquired tokens will be added to the reserve surplus.

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Unlike relying on third-party custodians, Tether will take custody of the BTC stash itself, as stated in their announcement. By maintaining direct control over the custody of these assets, the company aims to enhance its operational autonomy and oversight.

Bitcoin, Gold, and US Treasury Bonds Back Tether’s $5 Billion Assets

This latest development comes on the heels of Tether’s recent revelation that it holds substantial amounts of BTC and gold, valued at $1.5 billion and $3.4 billion, respectively, as part of its asset portfolio. 

These assets support Tether’s primary stablecoin, USDT, and its smaller stablecoin counterparts. The company’s 2023 Q1 attestation confirms that approximately 85% of its reserves are held in cash and cash-like assets, including U.S. Treasury bonds.

Stablecoins, representing a formidable $131 billion asset class, play a critical role in the cryptocurrency ecosystem by facilitating seamless trading and transactions between government-issued fiat currencies and digital tokens. 

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These stablecoins maintain a fixed value pegged to an external asset, typically the U.S. dollar, ensuring price stability.

Tether CTO Highlights Bitcoin’s Long-Term Potential

Tether’s BTC purchase campaign aims to fortify and diversify its stablecoin reserves while capitalizing on the investment potential of Bitcoin’s price appreciation, as highlighted in their press release. 

Paolo Ardoino, Tether’s chief technology officer, emphasized Bitcoin’s resilience and long-term value proposition, stating, “Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. 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.”

On the Flipside

  • Tether’s decision to regularly purchase bitcoin for its stablecoin reserves may help diversify the assets and potentially capitalize on its price appreciation.
  • While Tether’s self-custody approach for storing the acquired BTC showcases the company’s desire for autonomy, skeptics suggest utilizing third-party custodians could provide an added layer of security and trust.

Why You Should Care

By strengthening and diversifying its reserves with BTC, Tether aims to capitalize on the potential price appreciation of the leading cryptocurrency while reinforcing the role of stablecoins as vital building blocks within the crypto ecosystem.

To learn more about Tether’s efforts to strengthen its reserves as USDT profits surge in Q1, read here:

Tether Fortifies Reserves & USDT Profits Surge in Q1 Triumphs

To delve into the reasons behind the raised alarms surrounding Ledger’s new recovery service, check out this article:

Here’s Why Ledger’s New Recovery Service Raised Alarms

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a cryptocurrency news reporter for DailyCoin, specializing in Ripple, stablecoins, as well as price and market analysis news. Before his current role, Kyle worked as a student researcher in the cryptocurrency industry, gaining an understanding of how digital currencies work, their potential uses, and their impact on the economy and society. He completed his Masters and Honors degrees in Blockchain Technology within Esports and Business and Event management within Esports at Staffordshire University.