- Tether is said to regularly allocate up to 15% of its monthly income towards the purchase of Bitcoin.
- Tether’s market share of BTC volumes recovered after a 2022 crash.
The latest investment strategy from stablecoin issuer Tether [USDT] to buy Bitcoin [BTC] of realized gains, according to Digital Asset Manager CoinShares, was expected to drive up the price of the King Coin.
Coinshares stated that large one-time purchases like Tether’s invariably affect the price. However, it was still unclear how much BTC could win.
Tether’s decision to buy and regulatory arbitrage are likely to support Bitcoin’s pricehttps://t.co/rUSZvfty7F
— James Butterfill (@jbutterfill) May 18, 2023
Realistic or not, here is the USDT market cap in BTC terms
Estimation of the magnitude of the impact
Tether’s planned purchase of Bitcoin was part of its approach to increase and diversify reserves to support the USDT stablecoin. The company said it would regularly allocate up to 15% of its monthly revenue — about $75 million as estimated by Coinshares — to purchase BTC starting in May.
As obvious as it may seem, $75 million is insignificant compared to BTC’s monthly trading numbers, which go into the trillion and half trillion dollars. However, Coinshares supported the price increase theory using data from the Fund Flows report.
According to data, there was a weekly price increase of 2.3% when weekly fund inflows were between $10 and 20 million. While there were instances where these deductions were incorrect, prices rose in more than 60% of cases.
Tether looks confident
Meanwhile, Tether’s market share in BTC volumes, which had been squeezed by Binance’s zero-fee policy in 2022, rebounded remarkably. This implied that the company could continue to be profitable in the short term and the monthly purchase of BTC will continue without interruption.
Source: CoinShares
USDT made a blockbuster run in 2023 with a strong increase in valuation over the past three months. According to Glassnode, the market cap of the dollar-pegged stablecoin was $82.85 billion, making it the third-largest cryptocurrency and the largest stablecoin by market capitalization.
USDT’s market cap recovered from losses since May last year, the stage before the dreaded 2022 bear market.
With BTC, Tether aims to boost its reserves, which have shrunk significantly year-over-year (YTD) according to data from Santiment.
Source: Glassnode
Read Bitcoin [BTC] price forecast 2023-24
BTC drops below $27k
Meanwhile, BTC’s move into the $27,000 zone was short-lived as the king coin fell back to $26,000. At the time of publication, BTC was valued at $26,813.84, down 2% in the past 24 hours, according to data from CoinMarketCap.
The Open Interest (OI) for Bitcoin futures registered a drop of nearly 3% in the past 24 hours, according to Coinglass. The OI is down more than 9% in the past month as traders balked at speculative bets on BTC’s price movement.
Source: Coinglass
