As of the end of March, the company held $1,5 billion in BTC

​Tether will start regularly investing up to 15% of profits in bitcoin

17.05.2023 - 14:05

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4 min

What’s new? Tether, the issuer of the USDT stablecoin, will begin regularly allocating up to 15% of its realized net operating profits to BTC purchases starting this month. The firm’s officials expect that current and future bitcoin holdings will not exceed its shareholder capital cushion and will further strengthen and diversify its reserves. The company held $1,5 billion in BTC at the end of March, according to its Q1 2023 report. In addition, Tether will not turn to custodians and will keep its own private keys to bitcoin wallets. Tether is taking a “Not your keys, not your bitcoin” approach, the company stressed.

Tether’s announcement

Tether is the largest issuer of stablecoins in the crypto market. Centralized USDT, which is pegged to the US dollar, ranks third in the overall cryptocurrency ranking with a capitalization of $82,86 billion as of May 17.

What is the rationale behind the company’s decision? Under the new approach, Tether will focus solely on leveraging realized profits from its investment strategy without taking into account unrealized capital gains caused by rising prices. This means that the company will only account for tangible gains from its operations, which consist of the difference between the purchase price and net proceeds from the sale or, in the case of maturing investments, between the purchase price and the reimbursed amount.

Tether CTO Paolo Ardoino said that the decision to invest in bitcoin is underpinned by its strength and potential as an investment asset. He noted that BTC, by continually proving its resilience, has evolved into a long-term store of value with significant growth potential. Its limited supply, decentralized system, and wide distribution have made the first cryptocurrency the preferred choice among both institutional and retail investors, Ardoino added.

According to representatives of Tether, bitcoin has demonstrated investment potential, posting impressive returns over the past decade. Its performance, combined with growing recognition and adoption by major financial institutions, has solidified the asset’s position as a key component of diversified investment portfolios.

Bitcoin is one of the top three protective assets in case of default in the US according to Bloomberg

Bitcoin is one of the top three protective assets in case of default in the US according to Bloomberg

This is evidenced by the results of a survey of professional and retail investors

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Among other smaller investments performed with its own capital, Tether is focusing on building communication (via peer-to-peer technologies such as Holepunch), energy, and bitcoin mining infrastructure.

The statement notes that Tether will continue to adhere to strict risk management practices to ensure the stability and security of operations. The company “remains steadfast in its commitment to maintaining the stability of its flagship stablecoin, Tether (USD₮), while exploring innovative opportunities in the ever-evolving digital asset landscape.”

Tether cut its bank deposits by 90% in Q1, from $5,3 billion to $0,481 billion, to mitigate risks that could arise if financial institutions go bankrupt.

In early May, analytics software company MicroStrategy, which is the largest bitcoin holder among public firms (140 000 BTC), allowed the possibility of selling part of coins to cover liabilities.

On November 18 last year, the authorities of El Salvador began buying one bitcoin every day. The country was the first in the world to legalize the cryptocurrency in September 2021.

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