The company behind asset-backed cryptocurrency stablecoin Tether plans to invest heavily in Bitcoin in the coming months, resulting in the company becoming one of the largest and most significant Bitcoin investors. Tether recently announced a record net profit of $1.48 billion for Q1 2023 and laid out plans to invest up to 15% of all profit going forward.
Tether’s continued transparency has resulted in the company revealing its gold and Bitcoin reserves for the first time. As of May 9, 2023, the Group’s total consolidated assets tipped the scales at more than $81.8 billion. Most of Tether’s reserves are made up of Treasury bills, short-term deposits, cash, and cash equivalents, but the company also revealed approximately 4% of its reserves are in the form of gold, with Bitcoin making up around 2%. Currently, Tether has surplus reserves of $2.44 billion, another record high for the company.
Tether Already Holds $1.5 Billion Worth of Bitcoin
Basic math shows Tether currently holds around $1.5 billion in Bitcoin, the largest and most popular cryptocurrency of them all. An increasing number of mainstream, traditional companies accept Bitcoin as a direct payment method, including Microsoft, Rakuten, and Starbucks, in addition to some of the best Bitcoin books available online. Of course, Tether will not spend its Bitcoin; instead, it plans to hold the cryptocurrency as a long-term store of value.
Should Tether’s latest financial figures remain the same throughout the remaining three quarters of the financial year, and the company stays true to investing 15% of its net profits into Bitcoin, Tether would add approximately $670 million worth of additional Bitcoin to its portfolio by the end of 2023. It would then add a further $890 million during 2024, taking its holding to more than $3 billion at current prices.
Tether CTO Signs Bitcoin’s Praises
Paolo Ardoino, Tether’s CTO, is a Bitcoin advocate, citing its resilience as one reason for Tether’s continued investment. Ardonio made a statement on the Tether official website that reads:
“The decision to invest in Bitcoin, the world’s first and largest cryptocurrency, is underpinned by its strength and potential as an investment asset. Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favored choice among institutional and retail investors alike.”
“Our investment in Bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology that has the potential to reshape the way we conduct business and live our lives.”
Former Goldman Sachs Investment Banker is Not So Bullish
Matt Levine is a former investment banker at Goldman Sachs and now writes an opinion column for Bloomberg. It is fair to say Levine is not as bullish about Tether as Tether’s CTO. On several occasions, Levine has lambasted Tether about how it goes about its business and the lack of transparency shown by the crypto giant.
Levine’s latest article initially praises Tether for increasing its capital ratio from a paper-thin 0.2% last year to about 3% today. However, Levine soon switches his stance and highlights three reasons prominent investors are suspicious of how Tether operates.
First, Levine cites Tether’s continued promises to provide fully audited financial statements, promises the company never fulfills. Indeed, Tether’s latest attestation was not independently audited but signed off by BDO Italia.
Levine goes on to say that although Tether regularly states US dollar assets back each Tether token, this has not always been the case. Levine points to a case in 2018 when there were murky loans to Tether affiliates.
Lastly, Levine claims it is clear some Tethers were created by customers depositing $2 or less worth of Bitcoin and receiving one Tether, not by customers depositing $1 and receiving one Tether. Such fractional reserve banking would render Tether partially unbacked if Bitcoin’s value fell, much like the massive collapse in November 2022.
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