Tether’s Latest Investment Strategy: Make Profits, Buy Bitcoin

Stablecoin issuer Tether said Wednesday it intends to regularly allocate up to 15% of its net realized operating profits towards purchasing bitcoin, which it will custody itself.

The company said, in a statement on Wednesday that its focus will be solely on utilizing the profits it has actually realized.

Any unrealized capital gains that result from price increases, meanwhile, will be disregarded. That means it will only consider the concrete gains from its operations.

Despite facing persistent scrutiny regarding the authenticity and certainty of its reserves, Tether’s stablecoin (USDT) holds the distinction of being the third-largest digital asset globally, behind bitcoin (BTC) and ether (ETH). USDT has a total market capitalization of $82.7 billion, data from CoinGecko shows.

“Tether’s purchase of BTC is part of its conservative and prudent approach to investment decisions aimed at strengthening, increasing and diversifying its reserves,” the company said. “By implementing this framework, Tether aims to enhance transparency and provide a clearer view of the company’s performance and capital allocation strategy.”

Tether’s decision to invest in bitcoin reflects the broader trend of institutional and retail investors incorporating the bellwether asset into their investment strategies including, most notably, MicroStrategy.

According to the company’s statement, Tether expects that its existing and future bitcoin holdings in reserves will not surpass the Shareholder Capital Cushion.

That reserve capital buffer — intended to ensure the stability of its operations — stands at $2.4 billion, according to Tether’s webpage. As of March, Tether’s reserves contained approximately $1.5 billion worth of bitcoin, per the statement.

In February, Tether announced that it had increased its stablecoin reserves by $700 million through net profits in the fourth quarter of 2022. The quarterly report for that period emphasized a decrease of $300 million in secured loans and a notable allocation of assets in US Treasury bills.

According to Paolo Ardoino, the company’s chief technology officer, Tether is projected to record a profit of $700 million in the first quarter of this year, Blockworks previously reported.


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Source: https://blockworks.co/news/tether-buying-bitcoin