Bitcoin's Potential 30% Drop Could Threaten Tether's Stability, Says Arthur Hayes

Tether’s recent downgrade by S&P Global Ratings has sparked various reactions within the cryptocurrency community. The stablecoin received a negative ‘weak’ rating as S&P highlighted its increasing exposure to ‘high risk’ assets like Bitcoin and gold. Arthur Hayes, founder of BitMEX, responded to the report by expressing his concerns, stating that if Tether were to see a 30% decline in its investments in Bitcoin and gold, it could potentially lead to insolvency for USDT.

Key Takeaways

S&P Global Ratings downgraded Tether’s USDT due to increased risk exposure.
Arthur Hayes warns that a 30% drop in Bitcoin and gold could render Tether insolvent.
Tether currently claims to back USDT with $139 billion in cash and equivalents but faces a $34 billion shortfall in a liquidity crisis.
Some analysts express skepticism regarding the insolvency claims, noting Tether’s substantial asset base.
As of 2025, Tether holds 87.2K BTC, valued around $8 billion, and is a significant player in the gold market.

A 30% drop in Bitcoin could make Tether 'insolvent,' warns Arthur Hayes

Understanding Tether's Risk Exposure

Tether's third-quarter report revealed that the firm backs USDT with around $139 billion in cash and equivalents. However, the backing also includes a significant amount of ‘illiquid’ assets like gold, Bitcoin, and other financial instruments.

Expert Opinions on Tether's Stability

The crypto community is divided on the potential risks associated with Tether. Some experts, like Ryan Berckmans from the Ethereum community, echoed Hayes' concerns, questioning why about $40 billion of USDT is supported by riskier assets instead of cash. He argued that stablecoin operators should ensure their reserves are sufficiently risk-averse and easy to liquidate.

According to Tether's transparency report, the company has approximately $174 billion in liabilities for USDT. With only about $140 billion in cash and equivalents, a liquidity crisis could expose Tether to a $34 billion shortfall when facing mass redemptions. This scenario is seen as a potential ‘ticking time bomb’ by several analysts, including Greg Osuri, founder of Akash Network.

Contrasting Views on Stability Claims

Despite warnings from Hayes and others, some industry analysts disagree. Mr. Anderson pointed out that a 30% market dip alone does not equate to insolvency. He stated that insolvency occurs when liabilities exceed assets, and even after significant declines, Tether's asset and liability figures remain comparable.

Joseph Ayoub, a former crypto research lead at Citibank, also countered Hayes' concerns, asserting that Tether is not facing insolvency and instead is well-positioned financially, akin to having a “money printing machine.”

As of 2025, Tether has become one of the largest holders of Bitcoin, boasting 87.2K BTC, valued at around $8 billion currently, and has significantly increased its investments in gold, emerging as a top buyer in the third quarter.

Conclusion

Tether's financial health has become a contentious topic in the cryptocurrency world. With contrasting opinions on whether its structure exposes it to insolvency risks, it's evident that the implications of a significant downturn in Bitcoin and gold markets warrant close attention. Ensuring transparency and reliability will be crucial as the market evolves.