Is Bitcoin a Good Investment?: One of The Biggest Players in Crypto is The Investor in Bitcoin. What Does It Mean for Prices?
May 19, 2023
If you’re wondering, “Is Bitcoin a good investment?” Here’s some news for you. Tether, a stablecoin issuer at the core of the cryptocurrency system, is currently stockpiling Bitcoin, implying that one of the cryptocurrency’s most crucial participants may eventually be among its largest investors. It is expected to be positive for digital asset values.
Tether creates USDT, the most valuable US-dollar stablecoin, with a market value of $83 billion, making it the third-largest digital asset after Bitcoin and Ether. Tether and other stablecoins underpin all trading and lending activities, providing a consistent source of value. This is important in a volatile environment since it offers crucial liquidity to traders, funds, and market makers.
Tether becomes a systemically significant actor, and the quality of the assets backing each USDT issued by the organization is scrutinized. Tether hasn’t always been as open as authorities would want. Based in the British Virgin Islands, the issuer resolved charges with New York state and the Commodity Futures Trading Commission in 2021 about its reserves and disclosure methods.
Tether stated in its latest assurance report — not an audit — signed off by BDO Italia that Bitcoin accounted for 1.8% of its total assets, which it claims outstripped liabilities by more than $2 billion as of the end of March.
There’s even more: Tether said on Wednesday that it will periodically dedicate up to 15% of its net realized operational profit to the purchase of Bitcoin, in addition to the $1.5 billion in Bitcoin it now keeps in reserve. According to the company, its existing and future Bitcoin holdings will not exceed the “shareholder capital cushion.”
This decision has the potential to be an additional bulwark for Bitcoin values, which have risen by more than two-thirds this year but have lately experienced a more than 10% drop from their April high.
Tether reported a record net profit of $1.48 billion for the first three months of 2023. If those figures hold up over the following three quarters, and Tether spends 15% of its profit on Bitcoin, the business would have spent $670 million on crypto by the end of 2023. All else being equal, it may contribute another $890 million in Bitcoin profit at present levels through 2024.
The pattern would add prolonged purchase pressure to Bitcoin prices, potentially lifting the whole crypto market.
So, if you’re wondering, “Is Bitcoin a good investment?” It is when you know when to invest in it. However, it represents the same risk to the digital asset market as Binance’s ascension to become the world’s most popular crypto trading venue: risk concentration. Not only is most of the crypto market risk-focused on Binance’s flawless operations and Tether’s support, but the stablecoin issuer may also take over a pillar of Bitcoin’s future price dynamics.