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Tether Bets on Bitcoin

Tether has announced its new investment strategy. To strengthen and diversify reserves, the company plans to regularly buy bitcoin with realized profits.

USDT logo, Bitcoin logo

This month Tether shared its 2023 first quarter reserve report. For the first time, the company revealed the breakdown of a category previously wrapped under 'Corporate Bonds, Precious Metals and Funds' caption. According to the disclosure, Tether stores $1.5 billion worth or 2% of the total reserves in bitcoin.

Tether's subsequent statements imply that its bitcoin holdings were not disclosed by chance. On May 17, Tether announced that the company plans to allocate 15% of net realized operating profits into bitcoin on a regular basis.

Tether's post about the new investment strategy.
Tether's post about the new investment strategy. Source: Twitter

Tether's estimated annual profits are currently running at around $6 billion, meaning that if they follow this rule, the company's 2% share of reserves in bitcoin will increase by 1 percentage point each year.

In its announcement, Tether devoted a full paragraph to explaining that only realized operating profits will be used to buy bitcoins. The counting of only tangible earnings in the profits is a normal prudency practice in accounting but looks like it had impressed the management of the $80 billion startup.

Tether's motivation to buy bitcoin has been driven by the world's first cryptocurrency’s "impressive returns", making it a good addition to a diversified investment portfolio. Paolo Arduino, Tether's CEO, said that he considers bitcoin not only a reliable investment but also a tool that will change life and business in the future.

The announcement also stressed that the reliability of bitcoin is confirmed by the fact that the largest financial institutions actively recognize it.

Tether will store the purchased bitcoins independently, without resorting to the help of third parties, stating the mantra "Not your keys, not your bitcoin."

Tether has shown a strong growth in capitalization since the beginning of 2023. As the dominant U.S. dollar pegged stablecoin USDT has returned to a market cap of $80 billion, a level last seen prior the Terra collapse in May 2022.

Since the early days of Tether some observers have suggested that newly minted waves of the stablecoin can be used as indicators of increasing bitcoin price, as the additional USDT is potentially used to buy BTC.

With Tether now planning to buy bitcoin with its realized profits could we see that correlation grow even stronger. We continue to Observe.