May 18, 2023: On Wednesday, Cryptocurrency giant Tether said it would purchase hundreds of money worth of bitcoin to back the biggest stablecoin.
The company said it would also support 15% of its net profit into Bitcoin to “diversify” the resources that back its USDT token, aiming to stick to a one each peg to the U.S. dollar.
That makes $222 million, based on the company’s last attestation report, providing a breakdown of the assets that create its USDT reserves.
Tether started revealing it was making profits from its USDT operation in February, declaring a net gain of $1.48 billion in March and taking its total excess USDT, which is reserving to $2.44 billion.
USDT is the biggest stablecoin in the market, which circulates a supply of more than $82.8 billion, CoinGecko data stated. It competes with Circle’s USD Coin and Binance’s BUSD.
Traders use stablecoins to move in and out of different cryptocurrencies without converting money back into fiat currencies.
“The decision to invest in Bitcoin, the first and largest cryptocurrency in the world, is underpinned by its pros and potential as an investment asset,” Tether CTO Paolo Ardoino stated.
“Bitcoin has continually stated its resilience and emerging as a long-term store of value with substantial increase potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favoured choice among institutional and retail investors alike.”
The move would make Tether a primary Bitcoin holder, following activities from multiple notable investors like Paul Tudor Jones and MicroStrategy boss Michael Saylor to accumulate huge stockpiles, believing that the token is immune to the effects of currency decreasing value and inflation.
Analysts and investors have said that Bitcoin could improve this year because of the influence of “whales” market players with significant financial firepower, enabling them to buy up vast sums of tokens.
Tether sought allaying investor fears by rotating out commercial paper and replacing these fund holdings with only U.S. government debt securities.
In February, the firm said it had whittled its commercial paper holdings to zero.
USDT and its issuer remain a source of conflict in the crypto market. The U.S. Section of Justice is investigating executives at Tether over possible bank fraud.
Stablecoins were a hot-button issue for regulators, who have been scrambling to figure out how it keeps the industry in check following the demise of several notable companies.
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