The company announced that it will invest 15% of its net profit in bitcoin to “diversify” the reserves that support the USDT stablecoin, with the aim of pegging it at a 1-to-1 exchange rate with the dollar.
The amount amounts to about $222 million, based on the company’s latest report, which provides a breakdown of the assets that make up the USDT’s reserves.
Tether reported a net profit of $1.48 billion in March bringing its total USDT excess reserves to $2.44 billion.
USDT is the largest stablecoin on the market, with more than $82.8 billion in supply in circulation, according to data from CoinGecko. It competes with Circle’s USD Coin and Binance’s BUSD.
Stablecoins are used by investors to “enter” and “exit” cryptocurrency positions without converting their money back into fiat.
“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 Tether’s CTO Paolo Ardoino.
“Bitcoin has consistently proven its resilience and has emerged as a long-term ‘store of value’ with significant growth potential. Its limited supply, decentralized nature and widespread adoption have positioned bitcoin as a preferred choice among both institutional and retail investors.”
The move will make Tether a major bitcoin holder, following moves by several notable investors such as Paul Tudor Jones and MicroStrategy boss Michael Saylor to accumulate huge holdings in the belief that the cryptocurrency is immune to the effects of currency devaluation and inflation.
Analysts and investors told CNBC earlier this year that bitcoin could receive a boost due to the influence of so-called “whales” – market players with significant financial clout, allowing them to buy huge amounts of tokens.
Tether’s methods of maintaining the $1 exchange rate for its stablecoin have caused controversy in the past due to concerns about the quality of its reserves. Previously, the company held much of its reserves in commercial paper – a form of short-term, unsecured debt issued by companies. This is considered less secure than other forms of debt, such as US Treasury bills.
Tether has tried to allay investors’ fears by rotating commercial paper and replacing it only with U.S. Treasury securities.
In February, the company said it had reduced its commercial paper to zero.
USDT and issuer Tether remain a source of controversy in the market with the US Department of Justice investigating its executives for possible bank fraud.
Stablecoins have already been a major issue for regulators, who are trying to figure out how to keep the industry under control following the collapse of several notable companies in the space, which caused rumblings in the cryptocurrency market.
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