Tether Limited, the company that introduced Tether, will commit to buying Bitcoin, which is trading on an upward trajectory, regularly to diversify its reserves, using up to 15% of its profits. The crypto company wants to strengthen its stablecoin and slowly but surely move away from US-based government debts. The announcement comes within a week of its quarterly financial report, where Tether reported $1.48 of net profit and an increase in token circulation of 20%, indicating the consumers’ trust. Tether will take immediate charge of the Bitcoins without using any third-party custodians, meaning it will keep all tokens in self-custody.
Tether Limited increased its holdings of Treasury bills to $81.1 billion while concomitantly reducing its exposure to cash. It’s estimated that 85% of its assets are exceedingly liquid in cash or cash equivalents, gold and Bitcoin accounting only account for 4% and 2% of Tether’s overall reserves. The Commodity Futures Trading Commission fined Tether Limited $41 million on allegations that the USDT is fully backed by fiat currencies. As we all know, a stablecoin is pegged, or tied, to another currency to reduce volatility, i.e., not widely fluctuate in value. A promise of transparency isn’t transparency.
Bitcoin Is Seen as A Long-Term Store of Value
Stablecoin issuer Tether aims to buy Bitcoin as an investment. Now, it’s essential to understand the context in which the decision was made. Bitcoin is the largest cryptocurrency by market capitalization, distributed, traded, and stored using a decentralized ledger system (the blockchain). Most importantly, Bitcoin has emerged as a store of value with significant growth potential. Some refer to Bitcoin as “digital gold” as it has a low correlation with other digital assets; it’s useful for storing value and hedging inflation. Its supply is fixed at 21 million, so it’s easy to understand investors’ allure. Every four years, the number of Bitcoins that can be mined is halved, so its inflation rate automatically decreases.
Tether Limited will invest in Bitcoin to enhance portfolio performance and align with a transformative technology that can reshape the way business is conducted. We’ve already seen how blockchain technology transforms banking and global finance, connecting users to financial markets. But how about outside of finance? Time will tell. According to Tether Limited, Bitcoin has investment potential, even if its value can rise or fall dramatically over a short period. If Bitcoin becomes the future currency, long-term holdings could generate profitable returns. Tether Limited’s decision to allocate some of its profits toward Bitcoin demonstrates its confidence in the ecosystem.
Tether’s New Strategy Could Drive Bitcoin’s Price to Rise
Although Tether Limited doesn’t have a fixed timeframe for its investment, it plans to take action by the end of the month. The crypto company will use tangible gains from its operations, which consist of the difference between the purchase price and the net proceeds from asset sales or between the purchase price and reimbursed amount if we’re talking about treasury bills. There’s a possibility that Tether’s new investment strategy will support the price of Bitcoin into the end of the year. More exactly, it can increase the number of investors willing and able to buy, increasing demand.
The deterioration of the US banking system has motivated many investors to seek alternatives, so they refrain from putting all their money in traditional financial instruments. Privacy is becoming increasingly difficult to maintain because political systems attempt to regulate and take control of the cryptocurrency market, which explains why investors are attracted to Bitcoin. They prefer systems that are enabled by decentralized technology. Blockchain eliminates the necessity of government-controlled central banks to issue and regulate currency. As volatile as the Bitcoin price is, it’s underpinned by supply, demand, competition, and sentiment.
Is Tether Likely to Outpace Bitcoin?
The cryptocurrency market follows a pattern that can be examined to make future predictions. Trading becomes a gamble if a buy or sell order is placed based on intuition or guesswork, so it’s crucial to obtain information about what’s going on. Bitcoin is typically the most traded cryptocurrency on online exchanges. Nevertheless, it shares the spotlight with USDT, leading to speculations that Tether might outpace Bitcoin. Based on 24-hour trading volume, Tether was ahead of Bitcoin – $ 31.85B USD. Whether it’s for business purposes or personal use, Tether tokens bring about many benefits, such as multiple blockchain support, unparalleled liquidity, and widespread adoption.
The main difference between Tether and Bitcoin is that the former is a fixed-price cryptocurrency whose market value is attached to a stable asset. Beyond supply and demand, Bitcoin isn’t tied to anything. Additionally, Tether is a centralized stablecoin, meaning that an intermediary bank oversees its tokens, whereas Bitcoin is decentralized, so no person or group has control. Tether acts like a store of value between investments since it’s always equal to one dollar. It’s one of the first and largest stablecoins, with a circulating supply of 82.84 billion. Each stablecoin issued is 100% backed by the Tether reserves.
Wrapping It Up
Bitcoin just got a vote of confidence as an asset that can be trusted to hold its value over time after Tether Limited announced that it would buy more cryptocurrency to back its stablecoin. The crypto company will continue to adhere to strict management practices to guarantee the stability and security of its operations, wanting to be more transparent; it’s fallen short on this aspect until now. The issuer of USDT will allocate 15% of its net realized operating profits toward purchasing Bitcoin, not counting unrealized capital gains resulting from price increases. Tether is now commonly used by traders and investors to move funds from crypto exchanges or hedge against market volatility.
Prior to implementing its new investment strategy, Tether Limited already had $1.5 billion in Bitcoin reserves. The crypto holdings won’t exceed its shareholder capital cushion which stands at roughly $2.5 billion. The stablecoin issuer could become one of the biggest Bitcoin holders, alongside MicroStrategy, whose latest purchase brought its Bitcoin holdings to approximately $4 billion, believing it’s the future of finance.