With a $222M Bitcoin investment, USDT issuer Tether increases the capacity of its stablecoin.
The company behind the USDT stablecoin, Tether, announced a recent purchase of $222 million worth of Bitcoin. With this new step, the company seeks to maintain the 1-to-1 correlation of its stablecoin with the US dollar.
The most recent certification report indicates that 15% of the monthly net profits will be allocated for said purpose. The company stated that this is a new approach to diversify internal treasury.
With this new investment announcement, the world’s largest stablecoin issuer reaches $1.5 billion worth of BTC. It is clear from this that the company is betting with all its might to maintain the correlation of its currency. It is worth mentioning that this asset is present in practically all major exchanges and brokers.
Tether Buys Bitcoin to Bolster Its New Focus
The Bitcoin bought by Tether is not transferred into custody to third parties. Instead, Tether is responsible for maintaining its own funds. In 2022, the firm announced the hiring of a new audit house to monitor its reserve reports.
In any case, relying on Bitcoin becomes a measure to access greater solidity. “The decision to invest in Bitcoin, the world’s first and largest cryptocurrency, is based on its strength and potential as an investment asset,” said the company’s CTO, Paolo Ardonio.
Although Tether is regularly the target of accusations about its solvency, the reserves of the Bitcoin it buys seem to give it solidity. Its main currency, USDT, remains the first of its kind and the third of the entire market in capitalization. In this case, it is only surpassed by Bitcoin itself and by Ethereum.
What is the New Crypto Company Scheme Looking for?
Teher’s new scheme, with Bitcoin at its center, has a particular goal in terms of the use of its profits. Thus, the equity placement approach would use only the earnings from the users’ investments. Meanwhile, it would not take into account unrealized gains from crypto market price increases.
Previously, the company had focused on placing a portion of its reserves in commercial paper. The latter is a type of short-term unsecured debt issued by companies. However, commercial paper is considered a very risky type of investment compared to other types of debt. This motivated Tether to reduce its reserves in this form of debt and replace it with US government debt securities.
By February 2023 the company’s reserves in commercial paper were brought to zero. The latter leads Tether to turn towards Bitcoin and from there, it announces the purchase of large amounts of that digital currency.
If this trend continues, it could be assumed that the company is taking steps to move away from government securities. Recently, Circle, the issuer of Tether’s closest stablecoin competitor USDC, announced rough measures such as supporting its reserves in Treasury bonds, but in the short term.
Tether has been under constant pressure for some time due to doubts about its reserves. Nonetheless, the company has managed to maintain the value of its primary stablecoin.
By Audy Castaneda