BitMEX co-founder Arthur Hayes has issued a stark assessment of Tether's (USDT) financial stability, suggesting that a significant decline in the stablecoin issuer's gold and Bitcoin positions could potentially wipe out its equity and render USDT technically insolvent.
What Happened
His analysis comes following Tether's latest reserve breakdown report, which shows the company holds substantial positions in both precious metals and Bitcoin.
According to the report, Tether's gold holdings total $12.92 billion while its Bitcoin position stands at $9.86 billion, combining for approximately $22.78 billion in exposure to these volatile assets.
Hayes, stated that "a roughly 30% decline in the gold + BTC position would wipe out their equity, and then USDT would be in theory insolvent."
This calculation suggests that a combined drop of approximately $6.83 billion in these two asset classes could eliminate Tether's financial cushion.
The Tether reserve report shows total assets of $181.22 billion backing its stablecoin obligations.
The majority of reserves remain in conservative instruments including U.S. Treasury Bills ($112.42 billion), reverse repurchase agreements ($21.05 billion combined), and money market funds ($6.41 billion). Cash and bank deposits represent just $30.1 million of the total reserves.
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Hayes further speculated that Tether is "in the early innings of running a massive interest rate trade," positioning itself for potential Federal Reserve rate cuts that would reduce its interest income from traditional holdings.
Why It Matters
The move into gold and Bitcoin, according to Hayes, represents a strategic shift to assets that "should in theory moon as the price of money falls."
The prominent crypto figure also predicted increased scrutiny from large holders and exchanges, suggesting they would "demand a real-time view of their balance sheet to assess the solvency risk of Tether."
Hayes anticipates mainstream media attention on the analysis, particularly from outlets critical of Tether's backing by Cantor Fitzgerald's Howard Lutnick.
Tether's reserve composition has evolved significantly over time, with the company gradually adding exposure to non-traditional assets including Bitcoin, gold, and other investments totaling $3.87 billion.
The company also holds $14.6 billion in secured loans, adding another layer of complexity to its balance sheet.
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