Published: April 3rd, 2024
Tether, the crypto company behind the USDT stablecoin, has raised its Bitcoin holdings to over USD five billion.
Using public blockchain data, analytics firm Arkham Intelligence peeked into Tether’s wallet and says the company now holds over 75,353 Bitcoin, valued at roughly USD 5.1 billion at time of writing.
In the first quarter of 2024 the company purchased 8,889 BTC. All told it makes Tether one of the market’s biggest Bitcoin owners, firming up its stated aim to continue accumulating the biggest crypto by market cap.
As the third-biggest cryptocurrency by market cap, USDT isn't far behind. In 2023 Tether announced its intention to regularly allocate up to 15 per cent of operating profit to purchases of BTC. The company needs a healthy store of the asset to maintain reserves at sufficient levels to back USDT.
The stablecoin, which refers to a digital coin typically backed by real world assets like US Dollars, has become integral to the crypto market nervous system. Traders use it widely to buy and sell cryptocurrencies, often giving it a 24-hour trading volume that’s larger than Bitcoin’s.
Two years ago, Tether was mired in controversy over claims that it had enough USD in reserve to back USDT with US Dollars on a one-to-one basis, a claim challenged by analysts and investors.
As for Bitcoin, its price had fallen to USD 65,048 at time of writing from a high of USD 71,000 reached on Monday, 1st April 2024.
Back in late September 2022, a report from Bank of America (BoA) noted that the volume of stablecoins flowing into exchanges had reached USD 490 million in one week, a 57 per cent increase over the previous seven days and the third consecutive week of net-positive inflows.
In hindsight, it was an early signal that the crypto market was on the road to eventual recovery. It suggested that more people were using stablecoins for practical purposes like making payments and sending remittances overseas, rather than a convertible asset for de-risking speculative crypto trades.
Stablecoins are cryptocurrencies backed by real-world assets, typically the US Dollar. Traders typically use them as a faster way to enter and exit trades in other cryptocurrencies, as they enable positions to be opened without having to convert to a ‘hard’ currency like the Greenback first.
In its 2022 report, BoA said that the extended trend of stablecoin inflows ‘indicate(d) that investors may be shifting back to a footing of increased digital asset exposure after weeks of de-risking.’
Crypto markets took a beating in 2022, often in parallel with US equity markets, as investors and forex traders sought less risky assets like USD.
Despite a wave of institutional adoption in 2021, cryptocurrencies were still seen by the wider market as risk assets. Bitcoin, the largest digital asset by market cap, mimicked the performance of a tech stock in 2022, which is very different to how crypto enthusiasts once predicted it would behave. It’s been an article of faith amongst pro-crypto investors that cryptocurrencies would function as ‘uncorrelated asset,’ enabling them to be an effective hedge against inflation or fiat currency degradation.
When the report was published, Bitcoin's price had sunk by close to 72 per cent from its all-time high of USD 69,044, priced at USD 19,112, according to data from CoinGecko.
The BoA report offered some hope to bruised crypto fans and traders, who had spent months watching in dismay as the impressive gains they’d made in 2021 been steadily slipping away.
On 11th January 2022, BTC fell by 4.1 per cent over a 24-hour period, briefly settling at USD 39,866.68 before recovering slightly above what was the psychologically important USD 40k level. Twenty-four hours later it had dropped 14 per cent from the start of the year. From the all-time high of USD 69,000 achieved in November 2021, the world's leading coin had sunk by an eye-watering 40 per cent.
Presaging BTC’s fall, ETH suffered a parallel slump the day before (10th January), falling below USD 3,000, a level not seen since September of 2021.
Data from CoinGecko showed that the second-largest cryptocurrency by market cap had shed 4.7 per cent of its value between Monday 10th January and Tuesday 11th January and lost as much as 21 per cent in the previous seven days.
After reaching a daily high of USD 3,200, Ethereum was changing hands at about USD 2,900 on Tuesday. Just two months ago, on 9th November, ETH hit an all-time high of USD 4,876. Since then, the coin has lost 37 per cent of its value.
By early February 2022, the much-touted arrival of traditional finance into crypto markets, where major banks, corporates and hedge funds all built up hordes of BTC and other leading coins, seemed to come to a halt.
Analysts at Wall Street stalwart JP Morgan published a report saying they saw 'notable challenges' in the coming months for cryptos two biggest coins by market cap. Bitcoin, they believed, would struggle to win over new institutional investors due to 2022’s price volatility. They also said Ethereum would face stiff competition from blockchain rivals like Solana as the year progressed.
Bitcoin's volatility makes it five times more prone to price swings than gold, and the raft of competitors lining up to take a chunk out of Ethereum's market share means its steady rise could be halted or even reversed.
They noted that BTC was currently more than five times more volatile than gold, belying the claims of many cryptocurrency commentators that BTC had become the equivalent of 'digital gold,' a hedge against inflation that could push the yellow metal off its traditional safe-haven perch.