In a recent analysis, Arthur Hayes, co-founder of BitMEX, raised alarms regarding Tether”s investment strategy, which involves increasing its reserves in Bitcoin and gold. He argues that this shift positions Tether to navigate a potential cycle of interest rate cuts by the Federal Reserve.
Hayes articulated his concerns in a post on X, emphasizing that Tether”s latest attestation indicates a strategic pivot toward assets likely to benefit from a declining rate environment. While lower Treasury yields could enhance the attractiveness of Bitcoin and gold, Hayes warned that a significant drop in these volatile assets could threaten Tether”s financial stability.
Tether currently claims to hold approximately $181 billion in total assets backing its stablecoin, USDT. This portfolio is primarily composed of cash and liquid securities, such as Treasury bills and money market instruments. Additionally, Tether”s reserves feature nearly $13 billion in precious metals, about $10 billion in Bitcoin, and over $14 billion in secured loans.
Recently, Tether faced scrutiny from S&P Global Ratings, which assigned it a “weak” stability rating due to the increased proportion of riskier assets, including Bitcoin, in its reserves. S&P noted that this strategy could elevate the risk of undercollateralization during periods of heightened market volatility.
In defense of its approach, Tether has criticized S&P”s rating methodology, claiming it does not accurately reflect the scale of the company”s daily settlement activities. As Tether continues to navigate the complexities of its asset management, the market is left to ponder the implications of its evolving strategy on the broader cryptocurrency ecosystem.
