Tether, the issuer of the stable cryptocurrency USDT, revealed its plans to invest part of its operating profit in Bitcoin. This move could affect the cryptocurrency market in several ways. Let’s see what these changes might be and how they might affect the future of Bitcoin and Tether.
Tether, the network issuing the stable cryptocurrency USDT, recently announced that it plans to purchase Bitcoin (BTC) by the end of May using operating profit. As Tether revealed, 15% of the net realized operating profit will be allocated to buy Bitcoins. The BTC thus acquired are expected to replenish the reserves that underpin the stable cryptocurrency USDT.
This announcement is a significant event for the cryptocurrency market. The reason is the potential triggering of a new wave of demand for BTC, which is likely to drive up the price of this cryptocurrency.
Meanwhile, Tether has already faced criticism regarding its reserves. This current announcement coincides with growing concerns about a possible U.S. insolvency. As a result, more entities, including Tether, are moving away from dollar-denominated debt instruments.
Tether revealed in its Q1 2023 report that Treasury bills constituted 6.5% of its reserves, a slight decline compared to the previous quarter. On the other hand, Bitcoin constituted only 2% of total USDT reserves for this period. This latest announcement underscores Tether’s plans to increase its reserves through the purchase of Bitcoins. Perhaps this step will allow for some rebound in Tether’s reserve evidence, which has fallen significantly on a year-over-year basis.
Tether’s BTC purchase will determine how much the USDT reserves will increase. The company’s net profit for Q1 2023 was $1.48 billion. If the net operating profit was similar to this figure, it would mean that Bitcoin might experience buying pressure at just over $220 million in the second half of May.
The amount of $220 million may not seem large, but the announcement alone may be enough to trigger a positive change in market sentiment. This is because such a significant announcement might be enough to stimulate demand from whales and institutions.
Tether revealed that it had about $1.5 billion in BTC reserves at the end of March 2023. BTC’s value was supported by the price increase in the first quarter. USDT also recorded strong year-on-year growth in its equity and maintained an upward trend despite recent price weakness.
However, it’s worth noting that adding more BTC to USDT reserves can add more volatility to the reserves of this stable cryptocurrency. This is due to the fact that Bitcoin’s volatile price movements will determine the value of BTC in reserves.
Such actions in the cryptocurrency market can generate many questions for novice investors. The cryptocurrency exchange Quark offers safe and simple means for buying and selling BTC, ETH, USDT, and USDC, which could be a valuable tool for those who want to dive into the fascinating world of cryptocurrencies.
The ultimate implications of Tether’s move for the BTC market and USDT itself are still unknown. However, valuing the reserves of the stable cryptocurrency increasingly based on Bitcoin can lead to increased volatility and risk. Nevertheless, it could also result in lifting the price of BTC through increased demand.
Time will tell how Tether’s BTC purchase will impact the dynamics of the cryptocurrency market. It’s important for investors to stay aware of market changes and adjust their investment strategies in response to new information. An important part of this process is using reliable sources of information, such as CoinDesk[https://www .coindesk.com /] or CoinMarketCap[https://coinmarketcap .com /], which provide current data on cryptocurrency prices and significant market events.
Cryptocurrencies such as Bitcoin and Tether are becoming an increasingly important part of the global financial system. Navigating this dynamic world can be a challenge, but also a great opportunity. Remember, however, that investing in cryptocurrencies involves risk and you should always make investment decisions with full awareness.