Will Tether’s latest strategy give a boost to BTC prices? This report suggests…

• Tether would regularly allocate up to 15% of its monthly earnings in the purchase of Bitcoin. 
• Tether’s market share of BTC volumes recovered after taking a hit in 2022.

The latest investment strategy by stablecoin issuer Tether [USDT] to purchase Bitcoin [BTC] from its realized profit, was expected to boost the price of the king coin, according to digital asset Manager CoinShares.

Coinshares stated that large one-off purchases such as those made by Tether invariably affect the price. However, it was still unclear how much BTC would stand to gain.

Tether’s decision to buy and Regulatory Arbitrage are likely to support the Bitcoin pricehttps://t.co/rUSZvfty7F

— James Butterfill (@jbutterfill) May 18, 2023

Realistic or not, here’s USDT’s market cap in BTC terms

Assessing the magnitude of the impact

Tether’s planned purchase of Bitcoin was part of its approach to increase and diversify reserves backing its USDT stablecoin. The company said that starting May, it would regularly allocate up to 15% of its monthly earnings – roughly $75 million as estimated by Coinshares, towards the purchase of BTC.

As obvious as it may seem, $75 million is insignificant when compared to BTC’s monthly trading figures, which go into trillion and half a trillion dollars. However, Coinshares backed up the price hike theory using data from its Fund Flows report.

According to data, there was a 2.3% weekly price increase whenever weekly fund inflows were in the range of $10-20 million. While there were instances where these deductions weren’t accurate, on more than 60% of the occasions, prices rose.

Tether looks assured

Meanwhile, Tether’s market share of BTC volumes, which was squeezed by Binance’s zero fees policy in 2022, recovered remarkably. This implied that the company might continue to be profitable in the near term and the monthly purchase of BTC will proceed without interruption.

Source: CoinShares

USDT made a blockbuster run in 2023 with a sharp increase in valuation over the last three months. As per Glassnode, the market cap of dollar-pegged stablecoin was $82.85 billion, making it the third largest cryptocurrency and the largest stablecoin by market cap.

USDT’s market cap retraced the losses made since May last year, the phase before the dreaded bear market of 2022.

With BTC, Tether looks to boost its reserves which, as per data from Santiment, have shrunk considerably on a year-to-date (YTD) basis.

Source: Glassnode

Read Bitcoin’s [BTC] price prediction 2023-24

BTC drops below $27k

Meanwhile, BTC’s movement in the $27,000 zone was short-lived as the king coin fell back to $26,000 mark. At the time of publication, BTC was valued at $26,813.84, a drop of 2% in the last 24 hours, per data from CoinMarketCap.

The Open Interest (OI) for Bitcoin futures, recorded a decline of nearly 3% in the last 24 hours, as per Coinglass. The OI has dropped more than 9% over the past month, as traders shied away from making speculative bets on BTC’s price movement.

Source: Coinglass