Tether, the company behind the stablecoin Tether (USDT), is taking a page from MicroStrategy’s book by diversifying its reserves with Bitcoin. The stablecoin issuer plans to allocate up to 15% of its net realized operating profits towards purchasing Bitcoin on a monthly basis.
The decision comes shortly after Tether reported $1.5 billion in net profits in its quarterly financial report. The company aims to strengthen its reserves and move away from US government debts by investing in Bitcoin.
Tether clarified that it will keep all its Bitcoin holdings in self-custody. As of the end of the first quarter of 2023, Tether holds $1.5 billion worth of Bitcoin, which accounts for about 2% of its total reserves. The majority of its reserves, 85%, consist of cash, cash equivalents, and short-term deposits, primarily Treasury bills.
By embracing Bitcoin as part of its reserve strategy, Tether aims to diversify its holdings and potentially benefit from the value appreciation of the leading cryptocurrency.
In a statement, Tether chief technology officer Paolo Ardoino said that the world’s first and largest cryptocurrency is underpinned by its potential as an investment asset. He added that Bitcoin’s limited supply, decentralized nature and widespread adoption have positioned it as a “favored choice among institutional and retail investors alike.“
Tether’s move to invest a portion of its profits into Bitcoin on a monthly basis mirrors MicroStrategy’s strategy of replacing the US dollar in its reserves with Bitcoin. While MicroStrategy does not have a fixed timeframe for its Bitcoin investments, Tether plans to make its BTC purchases at the end of each month.
Both companies are recognizing the potential value and diversification benefits of holding Bitcoin as part of their reserve assets, indicating a growing trend among institutions to embrace cryptocurrencies as a store of value. By actively allocating their profits into Bitcoin, Tether and MicroStrategy are positioning themselves to benefit from the potential long-term appreciation of the leading cryptocurrency.