Stablecoin issuer Tether is presently under scrutiny after Arthur Hayes suggested that it may be sitting on a balance-sheet time bomb. In an X post, Hayes stated that Tether is effectively making a massive interest-rate bet.
In his post, Hayes noted that things could turn ugly if gold and Bitcoin retreat from current levels. Bitcoin price dipped by 17% over the last 30 days. However, it has managed to recover by around 6% in the last week. BTC touched $91,500 on the last day of November, pushing the crypto market to recover marginally.
Hayes shares big warning concerning Tether
Tether has the biggest stablecoin in the market, with the token boasting a circulating supply of 184.6 billion. Circle’s USDC stands second in the tally with a supply of 76.55 billion. However, Hayes’ latest reading of Tether’s situation looked blunt. He highlighted that the company appears to be positioning for Federal Reserve rate cuts.
This scenario would erode the yield it earns on its giant pile of Treasuries and cash-like instruments. In order to offset that, Tether has been steadily increasing its allocation to what Hayes calls “hard assets.” It represents roughly $13 billion in gold and close to $10 billion in Bitcoin. Hayes noted that a 30% slide in the value of Tether’s gold-and-BTC bucket would be enough to wipe out the firm’s equity cushion.
He claimed that the development can make USDT “in theory insolvent,” adding that some large holders and exchanges are likely to demand a clearer, real-time view of Tether’s reserve quality. Tether had declared more than $181 billion in total assets, with much of it in ultra-liquid securities such as Treasury bills, repo, and money-market positions.
Reports show that the firm has also expanded into higher-risk categories. This includes secured loans, venture investments, metals, and Bitcoin. S&P Global Ratings slapped the firm with a “weak” stability score earlier this month. The stablecoin issuer replied, calling S&P’s methodology outdated.
