In a recent commentary, Arthur Hayes, co-founder of BitMEX, raised alarms regarding Tether”s current strategy of increasing its reserves in Bitcoin and gold. According to Hayes, this shift signals the firm”s anticipation of a forthcoming cycle of interest rate cuts by the Federal Reserve, which could negatively impact Tether”s income derived from Treasury assets.
Hayes articulated his concerns through a post on X, suggesting that the latest attestation from Tether implies a strategic pivot towards riskier assets. He noted that while a rate cut could drive up the prices of both Bitcoin and gold, a significant downturn in these assets could severely jeopardize Tether”s equity cushion and exacerbate longstanding doubts surrounding the solvency of USDT.
Currently, Tether claims to have approximately $181 billion in assets backing USDT. This portfolio predominantly consists of cash and liquid securities, including Treasury bills and money market instruments. In addition, Tether has invested nearly $13 billion in precious metals, around $10 billion in Bitcoin, and more than $14 billion in secured loans, among other investments.
The risk associated with Tether”s strategy has not gone unnoticed. Recently, S&P Global Ratings assigned Tether a “weak” stability rating, citing the firm”s increasing allocation to risk-prone assets like Bitcoin. This rating reflects concerns that Tether may face undercollateralization in periods of heightened stress within the cryptocurrency market.
In defense of its strategy, Tether argued that the S&P rating framework is outdated and does not adequately account for the scale of their daily settlement flows. As the landscape continues to evolve, the implications of Tether”s investment decisions will be closely monitored by market participants.
