Key Points
- According to the analyst, in order to uphold the peg, Tether might have to sell off their BTC holdings.
- However, Tether’s CTO, Paolo Ardoino, has reiterated that most of Tether’s tokens in circulation are backed by safe Treasury bills.
- In a recent tweet, Ardoino explained that the 1.5 billion worth of BTC was purchased using surplus reserves, which represents the company’s equity.
In a recent tweet, Paolo Ardoino, the Chief Technology Officer of Tether, shed light on the company’s purchase of 1.5 billion in BTC. According to Ardoino, the purchase was made using excess reserves, which represent Tether’s equity. On June 15, Ardoino announced that Tether is currently experiencing a state of overcapitalization, with an excess of over $2.5 billion. This surplus, he stated, is in addition to the minimum reserves of 100% that Tether always maintains to cover all outstanding tokens.
The tweet was a response to DeFi analyst Cryptopainzy’s tweet, which pointed out that “$USDT holds $1.5 billion worth of $BTC.” Cryptopainzy indicated that if Tether faces significant pressure, it may have to sell off its assets to maintain the peg. Moreover, they alleged that Tether utilized its earnings to buy BTC.
also just a quick reminder that$USDT holds $1.5 billion worth of $BTC
if pushed hard enough, they would need to sell that to defend the peg even though those #BTC were bought with profits
$1.5B BTC to defend the peg, does that remind you of @stablekwon ? pic.twitter.com/7NkQg088yf
— painzy (@cryptopainzy) June 15, 2023
Reason Behind this Move
Tether, the popular stablecoin provider, has recently reaffirmed its position as a stable and secure investment option. USDT CTO Paolo Ardoino cited the fact that the vast majority of outstanding tokens are backed by secure Treasury bills (t-bills), adding validity to Tether’s already solid reputation.
1.5B in BTC are bought with excess reserves, that is company own equity.
The company is currently overcapitalized by 2.5B+ (on top of the minimum 100% reserves that we have to cover all outstanding tokens, among which the vast majority is t-bills).
A refresher on excess equity…— Paolo Ardoino 🍐 (@paoloardoino) June 15, 2023
Ardoino further explained that Tether possesses a surplus of over 2.5 billion USD (equivalent) in company-owned excess reserves, which amounts to approximately 3% above the minimum reserve requirement. However, Tether prioritizes the resilience of its stablecoin products and firmly believes that holding the mandatory 100% reserves to back its issued tokens is vital.
Unlike banks that can operate with fractional reserves, Tether has committed to maintaining an additional cushion to safeguard its user base. This approach, according to Tether, is necessary to ensure the stability of their product and to provide investors with a sense of security in their investments.
To further strengthen its commitment to providing a secure investment option, Tether has announced that it will utilize up to 15% of its monthly net operating profits to purchase Bitcoin as part of its excess reserves. This move demonstrates Tether’s dedication to maintaining a strong financial position and to providing its clients with peace of mind when investing in its stablecoin products.
Expert’s Views on the Matter
The topic of Tether’s Bitcoin holdings has stirred up a heated debate among experts in the cryptocurrency market. On one hand, there are concerns that Tether’s significant Bitcoin holdings could be utilized to manipulate the price of the popular cryptocurrency. If Tether were to abruptly sell off its Bitcoin reserves, it could potentially cause Bitcoin’s value to plummet, which in turn could have a ripple effect across the entire market.
On the other hand, some experts suggest that Tether’s Bitcoin stockpile is actually a sign of strength. By holding such a large amount of Bitcoin, Tether may be able to weather market downturns and maintain the stability of its stablecoin. Furthermore, Tether’s Bitcoin holdings could be generating substantial income through trading, thus bolstering the company’s financial position.
End Note
The revelation that Tether holds an impressive $1.5 billion worth of Bitcoin is bound to fuel further discourse regarding the company’s practices. While some experts are worried about the potential for market manipulation, others view Tether’s Bitcoin holdings as a promising sign of stability. As the cryptocurrency market continues to evolve, it remains to be seen how Tether’s Bitcoin reserves will ultimately impact the industry as a whole.
