“Trouble Ahead for Tether?” Hayes’ Warning Rekindles Market-Wide Jitters

Concerns about the financial footing of stablecoin issuer Tether returned this week after BitMEX founder Arthur Hayes warned that the company could face trouble if the price of key reserve assets dropped. The caution drew fresh attention across crypto markets, though others in the sector questioned his conclusions.

In a market note published on Dec. 5, CoinShares head of research James Butterfill said the renewed fear around Tether’s stability “looks misplaced.” He pointed to the company’s latest attestation, which lists $181 billion in reserves and about $174.45 billion in liabilities, leaving a reported surplus of close to $6.8 billion.

Market Update Sparks Debate

Butterfill wrote that while concerns around stablecoins should always be taken seriously, the numbers presented by Tether do not show signs of weakness at this time. He also noted that Tether remains one of the highest earning firms in the crypto industry, bringing in about $10 billion during the first three quarters of the year. 

The figure stands out due to the company’s small workforce compared with other financial firms that generate similar revenue.

Doubts about Tether’s financial strength have circulated for years, as media outlets and analysts have questioned the mix of assets behind its USDt token. The latest wave of worry appears to stem from comments Hayes made last week. 

He argued that Tether was “in the early innings of running a massive interest rate trade,” adding that a 30% slide in its Bitcoin and gold holdings could erase its equity and leave USDt “insolvent.”

Tether Pushes Back

Tether has increased its gold exposure in recent years, and both gold and Bitcoin make up a sizable share of its reserves. Even so, senior executives at the firm rejected the idea that the company is at risk.

CEO Paolo Ardoino recently challenged a move by S&P Global, which downgraded USDt’s strength in holding its peg to the US dollar. Ardoino dismissed the change as “Tether FUD” and pointed to the firm’s third quarter attestation to support his stance. S&P Global said its decision was influenced by Tether’s exposure to what it described as higher risk assets, including gold, loans and Bitcoin.

Despite the criticism, USDt remains the dominant stablecoin in the crypto market. It has about $185.5 billion in circulation and holds close to 59 percent of the entire stablecoin market, according to CoinMarketCap.