Tether Faces Fresh Insolvency Warnings Over Volatile Reserve Assets

Source: CoinEdition Original Title: Tether Faces Fresh Insolvency Warnings Over ‘Volatile’ Reserve Assets Original Link:

Tether’s Growing Exposure to Volatile Assets Raises Solvency Concerns

Arthur Hayes publicly warned that Tether’s growing exposure to riskier assets (namely, Bitcoin and gold) could pose a solvency risk if prices tumble.

According to Tether’s Q3 2025 attestation report, the company holds roughly $12.9 billion in gold and $9.9 billion in Bitcoin, alongside traditional holdings in cash, US Treasuries, repo agreements, and other instruments.

Hayes argued that a 30% drawdown in those Bitcoin and gold holdings could wipe out Tether’s equity buffer, theoretically rendering USDT insolvent. His post sparked a new round of doubt and debates across the crypto community.

Greg Osuri, the founder of the Akash Network, called Tether a ticking time bomb, while Willy Woo, a well-known on-chain crypto analyst, called on Grok to compare Tether’s asset backing to a traditional bank.

Comparing Tether’s Reserve Buffer to Traditional Banks

The analysis showed that as of September 2025, Tether holds $181 billion in assets to cover $174 billion in liabilities it owes.

About 75-80% of its reserves are in safe, easily-sold assets like cash and US government bonds, but 20-25% is in riskier investments such as Bitcoin and gold, which makes it liquid but vulnerable to price drops, just as Hayes pointed out.

As for bank comparison, a typical US bank only keeps 10 to 20% of its money in cash or safe securities, with most tied up in loans. They keep far less cash on hand (around 10%) but have two big safety nets – deposit insurance and the ability to get emergency money from the Federal Reserve.

Overall, traditional banks are more resilient, where Tether’s main protection is having more assets than liabilities, but it has no government backstop and has lost its $1.00 peg before. On the other hand, banks have government backing but can still collapse.

A few days ago, credit rating agency S&P downgraded Tether’s USDT stablecoin to the lowest possible rating on its stability scale, labelling it as weak. USDT now has a rating of 5, which is the lowest possible score on S&P’s 1 to 5 scale.

The downgrade is due to Tether holding more of its reserves in riskier assets like Bitcoin, gold, corporate bonds, and loans, rather than pure cash.