S&P Global Ratings downgraded Tether’s USDT stablecoin to a ‘weak’ rating due to increased exposure to high-risk assets like Bitcoin and gold. This has sparked debate in the crypto community about the stablecoin’s solvency and liquidity risks amid its $174 billion in liabilities.
S&P Global cites rising risks from Tether’s Bitcoin and gold holdings as key factors in the downgrade.
BitMEX founder Arthur Hayes warns that a 30% drop in these assets could lead to theoretical insolvency for USDT.
Tether’s Q3 report shows $139 billion in cash equivalents backing its $174 billion liabilities, with the rest in illiquid assets like 87,200 BTC valued at $8 billion.
Explore the Tether USDT rating downgrade by S&P Global and expert views on its reserve risks. Learn why Bitcoin and gold exposures are raising alarms—discover stability insights now.
What is the Impact of S&P Global’s Tether USDT Rating Downgrade?
Tether USDT rating from S&P Global Ratings has been lowered to a negative ‘weak’ status, highlighting concerns over the stablecoin’s growing investments in volatile assets such as Bitcoin and gold. This downgrade underscores potential vulnerabilities in Tether’s reserve composition, which includes a mix of cash equivalents and riskier holdings. As the largest stablecoin by market capitalization, this assessment prompts closer scrutiny of USDT’s ability to maintain its $1 peg during market stress.
Tether’s USDT stability downgrade by S&P Global Ratings continues to elicit different views across the crypto community.
The stablecoin got a negative ‘weak’ rating, with S&P Global citing rising exposure to ‘high risk’ assets like Bitcoin and gold.
In response to the report, BitMEX founder Arthur Hayes stated that Tether increased its exposure to BTC and gold to front-run the typical rally associated with dropping Fed interest rates. However, he cautioned,
“A roughly 30% decline in the gold + $BTC position would wipe out their equity, and then USDT would be, in theory, insolvent.”
Source: Tether
According to the Q3 report shared by Tether, but not independently verified by third parties, the firm’s USDT was backed by $139 billion in cash and cash equivalents.
The remaining backing was dominated by ‘illiquid’ assets, including gold, BTC, loans, and other instruments.
How Do Tether’s Reserves Affect Its Overall Stability?
Tether’s reserves present a complex picture, with $139 billion in highly liquid cash and equivalents forming the core backing for its $174 billion in USDT liabilities, as detailed in the company’s Q3 transparency report. The balance includes significant allocations to Bitcoin, gold, and other assets, which S&P Global views as high-risk due to their volatility; for instance, Tether holds 87,200 BTC valued at approximately $8 billion. Experts like Arthur Hayes emphasize that while this strategy aims to capitalize on market rallies, a sharp 30% decline in these positions could erode equity and threaten solvency. In contrast, the report shows total assets at $181 billion, exceeding liabilities and indicating solvency on paper, though liquidity remains a concern during redemption pressures. This fractional reserve model mirrors traditional banking but amplifies risks in the crypto ecosystem, where rapid market shifts can trigger runs.
Some analysts supported Hayes’ warning. On his part, Ryan Berckmans, an Ethereum community member, said,
“Why are ~$40B in USDT backed by assets riskier than cash and cash equivalents? When my stablecoin operator keeps all the yield, I at least want them to be fully backed by risk-minimized reserves.”
Per Tether’s transparency report as of Q3, it had $174 billion in liabilities for USDT.
Compared to about $140B in cash and cash equivalents, it meant that in a liquidity run and widespread instant redemption, Tether would be short by $34B.
For Akash Network founder Greg Osuri, the disparity with cash assets was a ‘ticking time bomb’ for USDT.
Source: X
Tether’s BTC Holdings Reach $8 Billion
Tether’s strategic pivot toward Bitcoin and gold has positioned it as one of the largest corporate holders of BTC, with reserves now totaling 87,200 coins worth about $8 billion at prevailing market prices. This accumulation, which doubled in 2025, reflects Tether’s bet on these assets to hedge against fiat devaluation and capture yields from interest rate cuts. However, S&P’s downgrade highlights how such exposures introduce volatility that could undermine USDT’s stability mechanism. According to Tether’s self-reported data, these holdings contribute to an overall asset base of $181 billion, surpassing liabilities but relying on illiquid sales for full redemptions.
Put differently, Tether was solvent paper, its $181 billion assets surpassed its $174 billion in liabilities. But it was not fully liquid and operated like a fractional reserve design used by traditional banks.
But others disagreed with Hayes’ take. For example, Mr. Anderson, countered the 30% decline and added,
“A mark-to-market dip isn’t insolvency. Insolvency means assets < liabilities, and even after a 30% hit, they’re roughly at parity. The real risk with any stablecoin is liquidity during a run, not “BTC dropped 30%, therefore Tether died.”
Joseph Ayoub, a former crypto research lead at Citibank, also debunked Hayes’ warning and highlighted,
“Tether isn’t going insolvent, quite the opposite; they own a money printing machine.”
As of 2025, Tether was amongst the top BTC holders, with 87.2K BTC worth about $8 billion at current prices. It has also doubled down on gold and became the top buyer in Q3.
Source: Arkham
Frequently Asked Questions
What Assets Back Tether’s USDT Stablecoin?
Tether’s USDT is primarily backed by $139 billion in cash and cash equivalents as of Q3 2025, according to the company’s transparency report. The remaining reserves include Bitcoin holdings worth $8 billion, gold, loans, and other instruments, totaling $181 billion in assets against $174 billion in liabilities. This mix ensures peg stability but introduces risks from volatile components.
Why Did S&P Global Downgrade Tether’s Rating?
S&P Global issued a ‘weak’ rating for Tether due to its increasing exposure to high-risk assets like Bitcoin and gold, which could jeopardize the USDT peg during market downturns. The agency emphasized the stablecoin’s fractional reserve structure, where not all liabilities are matched by immediate liquid assets, raising concerns over redemption capabilities in stress scenarios. This assessment aligns with ongoing debates about stablecoin transparency and risk management.
Key Takeaways
- Tether’s Downgrade Highlights Risks: S&P Global’s ‘weak’ rating stems from USDT’s heavy reliance on volatile Bitcoin and gold reserves.
- Expert Divide on Solvency: While Arthur Hayes warns of potential insolvency from a 30% asset drop, others like Joseph Ayoub view Tether as resilient with strong asset growth.
- Liquidity as Core Concern: With $34 billion shortfall in cash equivalents versus liabilities, users should monitor Tether’s ability to handle redemption runs effectively.
Conclusion
The Tether USDT rating downgrade by S&P Global has ignited vital discussions on stablecoin reserves and their exposure to assets like Bitcoin and gold. As Tether maintains solvency with $181 billion in total assets against $174 billion in liabilities, the focus remains on liquidity challenges in volatile markets. Moving forward, enhanced transparency and diversified reserves could bolster confidence in USDT’s stability—investors are advised to stay informed on these developments for informed decision-making.