- Tether to use up 15% of its net realized operating profits to buy more BTC.
- Potential demand for BTC may witness a surge as Tether announces plans to buy.
Tether might be about to spice things up in the crypto market with its latest plans. The network just announced that it plans to buy Bitcoin [BTC] before the end of May, using its net realized operating profits.
The USDT issuer just revealed that it plans to use 15% of its net realized operating profits to buy Bitcoin. Tether also noted that the purchases will be used to strengthen the reserves backing the USDT stablecoin. In addition, the company plans to commence those purchases within the next two weeks.
Tether????#Bitcoin
Starting this month, Tether will regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin. These Bitcoin shall be considered on top of the minimum reserves assets that 100% back tether tokens.
More ???? https://t.co/7zC2swgwWH pic.twitter.com/BOcSDjjmDf
— Tether (@Tether_to) May 17, 2023
The announcement represented an important move for the market. This was because it will usher in a new wave of bullish demand for BTC, which will likely raise its floor price.
Meanwhile, Tether has previously been the subject of criticism regarding its reserves. The announcement also comes at a time there have been growing concerns about the U.S. possibly defaulting on its debt. As such, more entities including Tether are now moving away from dollar-denominated debt instruments.
A look at Tether’s Bitcoin reserves
Tether revealed in its Q1 2023 report that treasury bills accounted for 6.5% of its reserves, a slight drop from the previous quarter. Bitcoin only accounted for 2% of the total USDT reserves during the quarter. This new announcement underscored Tether’s plans to boost its reserves using Bitcoin. Perhaps this move will allow for some recovery in Tether’s proof of reserves which slid by a sizable margin on a year-to-date basis.
Source: Glassnode
Tether’s BTC purchases will determine just how much USDT reserves will grow. The company’s Q1 2023 net profits came in at $1.48 billion. If the operating net profit was anywhere near this figure. This means Bitcoin might be about to experience slightly over $220 million in buying pressure in the second half of May.
While $220 million worth of buying pressure may not seem much, the announcement might be enough to trigger a bullish sentiment shift. This was because such a major announcement could be considered as enough to trigger a resurgence of demand from whales and institutions.
Tether revealed that it had roughly $1.5 billion in BTC reserves at the end of March 2023. The value of the BTC was aided by the Q1 rally. USDT also registered robust growth in its marketcap YTD and maintained an upward trajectory despite recent price weakness.
Source: Glassnode
Note that the addition of more BTC to USDT reserves may add more volatility to the stablecoin’s reserves. This is because Bitcoin’s volatile price movements will determine the value of the BTC in the reserves.
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