Tether to Invest Profits in Bitcoin Instead of US Government Debt

May 17, 2023

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The world’s largest stablecoin considers bitcoin a better long-term investment than US government debt.

Shifting Reserves From US Government Debt

Recently the company behind the world’s largest stablecoin was purchasing US government debt en masse. According to experts the company accumulated so many bills that it made it to the top 30 holders of U.S. treasuries in the world.

However, Tether, the issuer of the largest stablecoin, seemed to have about US government debt being a good investment. The company plans to invest up to 15% of its profits in bitcoin. It will use its earnings to regularly purchase bitcoin and shift its reserves away from US government debt.

Self-Custody of Bitcoin Holdings

Tether will hold all of its bitcoin in self-custody, meaning it will manage its own storage of the cryptocurrency. Currently, Tether holds $1.5 billion in bitcoin, which accounts for about 2% of its reserves. The majority of its reserves, around 85%, are held in cash, cash equivalents, and short-term deposits, including Treasury bills.

Bitcoin as a Long-Term Investment

Tether believes that bitcoin is a strong long-term investment with a track record of impressive returns. Over the past decade, the price of bitcoin has soared about 22,000%. Paolo Ardoino, the CTO of Tether, stated that bitcoin’s limited supply, decentralized nature, and widespread adoption make it an attractive choice for institutional and retail investors.

Tether🧡

Starting this month, Tether will regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin. These Bitcoin shall be considered on top of the minimum reserves assets that 100% back tether tokens.

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— Tether (@Tether_to)

Strengthening and Diversifying Reserves

Tether’s decision to invest in bitcoin aims to enhance the performance of its portfolio and align with the transformative potential of the cryptocurrency. By adding bitcoin to its reserves, Tether seeks to strengthen and diversify its holdings. The company anticipates that the current and future bitcoin holdings will not exceed the Shareholder Capital Cushion.

Buying Bitcoin with Realized Profits

Tether will use realized profits from its investments to purchase bitcoin. This approach focuses on tangible gains from asset sales and disregards unrealized capital gains. The company aims to capitalize on bitcoin’s price appreciation while considering it as a long-term store of value.

Paolo Ardoino, CTO of Tether, said in the statement:

The decision to invest in Bitcoin, the world’s first and largest cryptocurrency, is underpinned by its strength and potential as an investment asset. Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favored choice among institutional and retail investors alike. Our investment in Bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology that has the potential to reshape the way we conduct business and live our lives.

Commitment to Transparency

Tether is the largest stablecoin issuer, with over 83 billion tokens in circulation. The company has faced criticism in the past regarding transparency and investment decisions. However, Tether’s recent financial reports and commitment to providing a breakdown of its reserves demonstrate a dedication to transparency and accountability.

Conclusion

Tether’s decision to invest profits in bitcoin reflects its confidence in the cryptocurrency’s potential as a long-term store of value. By self-custodying its bitcoin holdings, Tether aims to strengthen and diversify its reserves. The company’s commitment to transparency and its position as a leading stablecoin issuer contribute to the ongoing development of the cryptocurrency ecosystem.

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