- Tether will use 15% of its net realized operating profit to buy more BTC.
- Potential demand for BTC could surge as Tether announces plans to buy.
Tether is about to brighten up the crypto market with its latest plans. The network just announced its intention to buy Bitcoin [BTC] before the end of May, based on its net realized operating profit.
Realistic or not, here is USDT’s market cap in terms of BTC
The USDT issuer has just revealed that it plans to use 15% of its net realized operating profit to purchase Bitcoin. Tether also noted that the purchases will be used to bolster reserves backing the USDT stablecoin. In addition, the company plans to begin those purchases within the next two weeks.
Tether
#Bitcoin
Starting this month, Tether will regularly allocate up to 15% of its net realized operating profit towards the purchase of Bitcoin. This Bitcoin is considered on top of the minimum reserves which are 100% back tether tokens.
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https://t.co/7zC2swgwWH pic.twitter.com/BOcSDjjmDf
— Tether (@Tether_to) May 17, 2023
The announcement represented an important step for the market. This was because it will usher in another wave of bullish demand for BTC, which will likely push the bottom price up.
Meanwhile, Tether has previously been the subject of criticism regarding its reserves. The announcement also comes at a time when there are growing concerns about a possible US default. 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 his Q1 2023 report Treasury bills accounted for 6.5% of its reserves, a slight decrease from the previous quarter. Bitcoin only accounted for 2% of total USDT reserves during the quarter. This new announcement underlined Tether’s plans to increase its reserves using Bitcoin. Perhaps this move will bring about some recovery in Tether’s reserve evidence, which has fallen by a significant margin since the start of the year.
Source: Glassnode
Tether’s BTC purchases will determine how much USDT reserves will grow. The company’s net profit in the first quarter of 2023 was $1.48 billion. If operating net profit was anywhere near this figure. This means Bitcoin could experience just over $220 million in buying pressure in the second half of May.
While $220 million in buying pressure may not seem like much, the announcement could be enough to spark an optimistic sentiment shift. This was because such an important announcement could be considered enough to trigger a resurgence in demand from whales and institutions.
Tether revealed that it did about $1.5 billion in BTC reserves at the end of March 2023. The value of BTC was helped by the Q1 rally. USDT also registered robust growth in its market cap YTD and maintained an upward trajectory despite the recent price weakness.
Source: Glassnode
Note that adding more BTC to USDT reserves can add more volatility to stablecoin reserves. This is because Bitcoin’s volatile price movements will determine the value of the BTC in the reserves.