• Tether has just bought more than $200 million worth of bitcoin as a means of backing their digital currency.
• Stable coins are digital currencies that maintain a dollar peg and are often supported by various forms of collateral.
• A report from 2019 alleges that many Tether holders used their units to purchase BTC, thus inflating the crypto industry in 2017.
What is a Stable Coin?
A stable coin is a digital currency that’s not subjected to the same volatility and speculative nature that one often sees with more mainstream cryptos, such as bitcoin and Ethereum. What makes them stable is that they are often supported by various forms of collateral, whether they be gold (or other precious metals) or fiat currencies like USD, the yen, or the yuan. Thus, they tend to retain their dollar pegs and don’t go crashing into oblivion like so many other assets have done in the past. One unit of a stable currency is often worth $1.
Executives behind the popular but somewhat controversial stable currency Tether have announced they just bought more than $200 million worth of bitcoin as a means of backing their digital currency. The goal amongst company members is to “diversify” reserves backing the token. The currency has been on a serious bull run since early this year, accumulating a net profit of close to $1.5 billion last March and reserves near $2.5 billion according to its CTO Paolo Ardoino.
This would all be fine and dandy except back in 2019 Texas professor John Griffin unveiled a report that explained the full bull run of 2017 and subsequent bear run in 2018 for the crypto industry was partially due to many Tether holders using their units to purchase BTC thus tying it to the asset keeping it afloat which ultimately helped BTC reach its then all-time high at $20K though it also contributed greatly to its crash following year .
Reasons Behind Purchase
The decision behind Tether’s purchase was underpinned by Bitcoin’s strength and potential as an investment asset; its limited supply decentralized nature and widespread adoption have positioned it as favored choice among institutional and retail investors alike according to Ardoino .
Though circumstances may be different this time around , there still remains concern regarding tether’s involvement with Bitcoin possibly leading back up its previous issues .