Credit rating agency S&P Global recently downgraded Tether's USDT stability assessment to the lowest level, at number 5. The main reason given was the increased proportion of high-risk assets in USDT's reserves, which may not provide sufficient buffer to absorb a drop in Bitcoin's value. BitMex founder Arthur Hayes strongly agrees, believing that Tether is heavily betting on a Federal Reserve interest rate cut, as this would significantly reduce their interest income. They are buying gold and Bitcoin, but if these assets fall by 30%, shareholder equity will be wiped out!
( S&P downgrades USDT to the lowest rating among stablecoins as Bitcoin exposure exceeds safety margin )
Tether is betting heavily on a Federal Reserve rate cut.
Arthur Hayes believes that Tether's team is in the early stages of large-scale interest rate trading. The Federal Reserve's rate cuts will significantly reduce their interest income, and to cope with this, they are buying gold and Bitcoin. This is because, theoretically, the prices of gold and Bitcoin should surge during a rate-cutting period.
The Tether folks are in the early innings of running a massive interest rate trade. How I read this audit is they think the Fed will cut rates which crushes their interest income. In response, they are buying gold and $BTC that should in theory moon as the price of money falls.… pic.twitter.com/ZGhQRP4SVF
— Arthur Hayes (@CryptoHayes) November 29, 2025
Gold and Bitcoin have fallen by 30%, could Tether's shareholder equity be wiped out?
However, Hayes also pointed out that if gold and Bitcoin fall by 30%, Tether's shareholder equity would vanish, and USDT would theoretically go bankrupt. He believes that some major shareholders and exchanges would demand immediate access to their balance sheets to assess Tether's solvency risk. Mainstream media would then extensively report on this, heavily criticizing Lutnick and Cantor for supporting such stablecoins.
Shareholders' equity has dropped to zero? What are the underlying reasons?
In fact, Hayes' remarks echoed S&P's reasons for downgrading USDT to the lowest rating among stablecoins. S&P stated in its report:
"Bitcoin currently accounts for approximately 5.6% of the circulating USDT supply, exceeding the 3.9% overcollateralization safety margin. This means that the reserves are no longer sufficient to fully absorb the impact of Bitcoin's decline. The decline in the value of Bitcoin and other high-risk assets may reduce the coverage ratio of the reserves, leading to insufficient USDT collateralization."
Because Tether has always highlighted over-collateralization in its transparency reports, as of September 30, 2025,
- Total assets: US$174,356,634,812
- Total liabilities amounted to US$174,445,364,503
Because assets exceed liabilities, Tether refers to this as over-collateralization. The difference between assets and liabilities would be listed as shareholders' equity on a traditional balance sheet, amounting to approximately $6.78 billion, with an over-collateralization ratio of 3.9%.
According to Hayes' theory, if both Bitcoin and gold fall by 30%, it will result in an unrealized loss of $6.83 billion, which means that shareholders' equity will go to zero!
Tether uses profits to buy Bitcoin and gold: What risks lie behind its empire expansion?
However, Tether doesn't actually buy Bitcoin or gold out of thin air. These purchases stem from its profits and excess reserves, not from newly issued USDT. It's more accurate to say that Tether continuously uses its profits to expand into other territories. But if these territories incur significant losses, will it affect its core stablecoin business? This is perhaps the real risk behind its imperial expansion.
In fact, Tether has become the largest holder of gold outside of central banks this year. Some analysts also believe that the real purpose of Tether's aggressive buying may be to bet on "gold tokenization" becoming the next crypto narrative.
This article, "Tether bets on Bitcoin and gold in preparation for interest rate cuts, Arthur Hayes: A 30% drop would mean zero equity for shareholders," first appeared on ABMedia .
