Tether to Invest 15% of Profits in Bitcoin

Tether has announced a strategic shift in its reserve assets from U.S. government bonds to Bitcoin, with the investment potentially reaching up to 15% of its monthly profits.

Tether to Invest 15% of Profits in Bitcoin

Stablecoin issuer Tether has revealed plans to allocate 15% of its monthly profits, derived from U.S. government bond investments, towards purchasing Bitcoin. This move is part of a broader strategy to reduce reliance on U.S. government bonds.

Tether stated that it will self-custody the Bitcoin acquired. As of the end of Q1 2023, the company reported holding $1.5 billion in BTC, which represents 2% of the total assets backing USDT.

According to the latest quarterly report, Tether's profits for the first three months of 2023 amounted to $1.5 billion, doubling its Q4 2022 figures. The company's surplus assets stand at nearly $2.5 billion.

Additionally, Tether holds $81.8 billion in reserves for USDT, with the majority in U.S. government bonds totaling $53 billion, and cash reserves amounting to around $500 million.

Risks and Strategic Shifts

Amid ongoing concerns about the U.S. debt ceiling, holding government bonds is viewed as risky, prompting a reallocation towards Bitcoin. Tether considers BTC a long-term hedge asset with substantial growth over the past decade.

However, the company did not disclose specific purchase schedules or individual transaction amounts. The total value of Bitcoin acquisitions will not exceed 15% of the surplus assets.

Paolo Ardoino, Tether's Chief Technology Officer, commented:

“Our decision to invest in Bitcoin, the world’s leading cryptocurrency, is driven by its strength and potential to become a new asset class. Bitcoin has consistently demonstrated resilience and emerged as a long-term safe-haven asset with significant growth potential. Its limited supply, decentralized nature, and widespread adoption make it a preferred choice for both retail and institutional investors.”

“Our investment in Bitcoin is not only aimed at enhancing the performance of our reserve asset portfolio but also at supporting a revolutionary technology that could reshape business operations and our daily lives.”

This move positions Tether to become a significant player in Bitcoin acquisitions, akin to MicroStrategy's strategy over the past two years.

Despite this, Tether’s investment in Bitcoin might remind some of the Luna Foundation Guard’s $3 billion BTC purchase, which failed to prevent the subsequent collapse of the LUNA-UST model.

In response, Ardoino emphasized that Tether’s BTC purchases will only represent around 15% of the surplus reserves and will not dominate the stablecoin's backing assets as the Luna Foundation Guard's investments did.

Bitcoin prices have shown little volatility following the announcement of Tether’s plan to invest a portion of its profits in BTC.

BTC/USDT 1-hour Chart on Binance at 07:30 PM on 17/05/2023