BitMEX founder Arthur Hayes published a new article on his X this morning (30th) warning that Tether, the leading stablecoin issuer, is anticipating an upcoming interest rate cut by the Federal Reserve and is significantly adjusting its asset allocation by buying gold and Bitcoin, which could lead USDT to a solvency crisis.
Based on this audit report, they clearly believe the Federal Reserve is about to cut interest rates, which would severely impact their interest income. In response, they began buying gold and Bitcoin, theoretically, these assets should take off when "currency prices" fall.
However, if their gold + Bitcoin holdings drop by about 30%, their equity will be wiped out, and USDT will theoretically become insolvent.
Are expectations of interest rate cuts causing Tether to shift towards highly volatile assets?
Tether has historically made huge profits by holding short-term U.S. Treasury bonds and earning interest. Hayes points out that this profit will shrink significantly as interest rates fall. To maintain profitability, the company recently increased its exposure to physical gold and Bitcoin. Hayes estimates that if the prices of gold and Bitcoin both fall by 30%, Tether's USDT will become insolvent.
Earlier this week, S&P Global Ratings also released a new report , downgrading USDT's stability rating from "4" (restricted) to "5", which is the weakest level in the agency's stablecoin rating scale.
The main reason for the downgrade: The proportion of high-risk assets has surged, and the buffer is no longer sufficient.
S&P pointed out that the two core issues of this downgrade are:
1. Tether's Bitcoin holdings have exceeded the safety buffer: Currently, Tether holds 5.6% of the circulating supply of USDT in Bitcoin, higher than the 3.9% shown in Tether's Q3 verification report. If the price of Bitcoin suffers a sharp drop, USDT's reserve assets may fall below full collateral.
2. Lack of transparency: S&P stated that in addition to the fact that Tether's proportion of high-risk assets has increased significantly from 17% a year ago to 24% (including Bitcoin, gold, secured loans, corporate bonds, etc.), and that its publicly disclosed information is extremely limited, the credit quality of Tether's custodians, counterparties, and banks has also been opaque for a long time.
S&P emphasizes that even though USDT still holds a large portion of its reserves in cash-like assets such as short-term US Treasury bonds, its overall structure still lacks the basic protections that a regulated market should have, such as strict separation of assets from the company's own funds and the ability for investors to redeem their funds directly at any time.
Tether CEO strikes back
Although both Hayes and S&P Global Ratings have issued warnings, there is not much panic in the community at present.
Firstly, these Bitcoins and gold were partly purchased using billions of dollars in profits Tether has earned over the years; secondly, the company still has sufficient means to adjust its balance sheet in a timely manner. The real concern might be whether the company has sufficient capacity to handle a run on its funds should the community experience a large-scale redemption due to unforeseen circumstances.
In response to S&P's downgrade, Tether CEO Paolo Ardoino publicly countered, stating that S&P's model is "out of touch with reality."
Rating S&P:
We take pride in your contempt.
The historic rating models you created for traditional institutions repeatedly lured private and institutional investors into "investment grade" companies, only to collapse afterward, forcing global regulators to question these models and the independence and objectivity of major rating agencies.
The traditional financial propaganda machine becomes restless whenever a company tries to defy the "gravity" of this broken financial system. The message is clear: no one should dare to decouple.
Tether chose a different path. We created the first "over-capitalized" company in the financial industry, with no toxic reserve assets, yet still highly profitable. Tether 's success reveals a disturbing truth: the traditional system has failed so badly that it has begun to fear those who expose the "emperor's new clothes."
Tether officially stated that dynamic cash flow can fill the gap.
Tether officially responded by emphasizing that the company is not a traditional bank, but rather a cash-generating machine capable of producing massive cash flows in a short period of time. According to its audited report for the first three quarters of 2025 , Tether's profits exceeded $10 billion, and its holdings of U.S. Treasury bonds exceeded $135 billion.
Management believes that if market volatility leads to book losses, quarterly earnings can recover in a very short time. S&P's static model ignores this "dynamic recovery" capability.
