Tether to divert up to 15% of profits into Bitcoin in ‘stability’ push

• Tether says it wants to use part of its profits to buy Bitcoin on a regular basis
• The stablecoin issuer already owns $1.5 billion worth of Bitcoin as part of its reserves

Tether has $1.5 billion in Bitcoin and will allocate as much as 15% of its profits into “stacking more sats” — the term for regular Bitcoin purchases — starting this month.

That’s according to an announcement by the stablecoin issuer outlining the company’s new investment approach. Tether’s eponymous stablecoin, USDT for short, is the largest with a market cap of nearly $83 billion.

“Tether’s decision to hold Bitcoin is in line with our strategic approach to diversifying our reserves and ensuring their stability,” Paolo Ardoino, chief technology officer at Tether, told DL News.

Today’s announcement comes on the heels of the company’s recent assurance report that explicitly showed Tether’s Bitcoin ownership for the first time.

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While Tether has held Bitcoin for years, Ardoino said those reserves have previously been filed under its “other investments” category.

“I would like to emphasise that Tether has no plans to sell its Bitcoin holdings,” Ardoino said.

Tether’s Bitcoin holdings currently account for almost 2% of its $82 billion asset holdings, which also include $53 billion in US Treasury bills and $3.4 billion in gold.

Tether reported close to a $1.5 billion net profit in the first quarter. The company’s surplus reserves came in at $2.44 billion, a part of which was used to acquire Bitcoin.

Changing reserves

Tether’s Bitcoin reserves also highlight how its holdings have changed over the years. The stablecoin issuer used to rely heavily on commercial paper, or unsecured and short-term corporate debt instruments, for its reserves.

However, the company has reduced its exposure to commercial paper holdings, having entirely replaced them with investments in the more secure US Treasuries as of 2022.

Now, Tether said it has completely unwound its commercial paper holdings. Meanwhile, the pivot to US Treasuries appears to be bearing fruit for Tether with decade-high interest rates in the US driving record revenue for the stablecoin firm, hence its profits this year.

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Tether said its goal is to maintain stability. The company said it aims to achieve this by reducing counterparty risk “as much as possible.”

“Their BTC position should be seen as a hedge against US interest rates because lower interest rates on Treasury bills — which would hurt their income more — is generally accompanied by higher BTC prices,” Konstantin Horejsi, chief product officer at crypto asset marketplace company Blocktrade, told DL News.

Tether has similarly reduced its bank deposits by over 90%, according to its first-quarter report. The stablecoin issuer highlighted the recent spate of bank failures as part of the reason for reducing its bank deposits to $481 million in the first quarter of the year, from the $5.3 billion reported in the previous quarter.

These decisions have helped it perform better than its competitors, the company said.

“Tether’s competitors have been impaired by overexposure to bank deposits as the financial system is experiencing troubles,” Tether stated in its report.