Is Tether Too Risky? BitMEX Founder Warns Bitcoin Drop Could Make USDT Insolvent

Arthur Hayes just threw a grenade into the stablecoin debate. The BitMEX co-founder spent his weekend crunching numbers on Tether’s reserves and didn’t like what he found. His conclusion? A 30% drop in Bitcoin and gold could wipe out USDT’s safety net completely.

Yeah, you read that right. The stablecoin backing over $180 billion in crypto trades might not be as stable as everyone thinks. Hayes laid out the math on X, and it’s got people nervous.

The Numbers Behind the Tether Warning

Let’s look at what Hayes found. He analyzed Tether’s Q3 2025 attestation report and spotted troubling patterns in how the company handles its reserves.

The stablecoin issuer now manages $181.2 billion in total assets backing USDT tokens. Here’s the catch: $9.9 billion sits in Bitcoin and $12.9 billion in precious metals, mostly gold.

Hayes ran the calculations. If these volatile assets drop 30%, the company loses about $6.8 billion in value. That number matches Tether’s equity cushion almost perfectly.

Why BitMEX’s Founder Sees Trouble Coming

Hayes isn’t making noise for clicks. His argument centers on what he calls a risky interest rate trade that might blow up.

Here’s the play Tether seems to be running. They expect the Federal Reserve to slash interest rates soon. Lower rates mean less income from their $135 billion pile of U.S. Treasury holdings. Their response? Buy Bitcoin and gold, betting these assets will rally when traditional yields tank.

Bold strategy. Some would say reckless.

Hayes explained his view clearly. “The Tether folks are in the early innings of running a massive interest rate trade,” he wrote. They’re positioning for Bitcoin and gold to surge as money becomes cheaper.

The trouble starts when you realize Tether’s thin equity layer can’t handle big losses on these bets.

Also Read: Top 5 Centralized Exchanges In Crypto 2025

How Tether’s Reserves Break Down

Understanding the risk means knowing what backs your USDT. The latest attestation from BDO shows a mixed bag.

Most of it looks safe. Around $112 billion sits in U.S. Treasury bills. They’ve got $18 billion in overnight reverse repos and $6 billion in money market funds.

Together, these cash-like holdings total roughly $140 billion. That’s what defenders point to when they claim Tether stays rock solid.

But $34 billion lives elsewhere. Besides Bitcoin and gold, there’s $14.6 billion in secured loans and $4 billion in other bets.

That 19% in riskier stuff? That’s what worries Hayes.

The Defense: Why Some Experts Aren’t Worried

Not everyone agrees with Hayes’s alarm bells. Industry voices have fired back at his insolvency claims.

Tran Hung, CEO of UQUID Card, dismissed the warning as missing the point. He says focusing only on equity misses the bigger picture.

Hung pointed to Tether’s track record. During the 2022 FTX meltdown, they handled $25 billion in redemptions over 20 days. No problem.

Former Citi Research analyst Joseph added crucial context. Attestation reports only show matched reserves, not Tether’s full books. The company maintains separate equity and investments in AI, energy, and communications.

These holdings don’t appear in reserve calculations at all.

Tether CEO Paolo Ardoino recently confirmed that total group assets approach $215 billion. Against $184.5 billion in stablecoin liabilities, that provides a serious cushion beyond basic attestations.

Also Read: How Bitcoin’s Scarcity Could Push It’s Price to $1.5 Million?

The Profit Machine Nobody Mentions

Here’s what often gets missed in solvency debates. Tether makes crazy money.

Over $10 billion in profit landed during the first three quarters of 2025. That comes from interest on Treasury holdings, currently earning about 4%.

With only 150 employees, they run lean. This profitability cushions against potential losses significantly.

Cory Klippsten, CEO of Swan Bitcoin, noted both sides. He calculated Tether runs 26x leverage with a 3.7% equity cushion.

“Despite the structural leverage, the risk gets offset by Tether’s massive profitability,” Klippsten said. He mentioned Tether’s owners pulled a $12 billion dividend recently and could recapitalize fast if needed.

What USDT Holders Should Know

Should you panic and dump USDT? Not necessarily.

Hayes’s scenario needs specific conditions. Bitcoin and gold are both tanking 30% together. Possible in a severe crash, but not the likely outcome.

Still, the warning exposes real structural risks that weren’t obvious before. Tether has moved from purely conservative to taking calculated risks with a chunk of reserves.

Hayes thinks if concerns grow, big holders and exchanges will demand live balance sheet data. Quarterly reports won’t cut it anymore. They’ll want real-time feeds showing exactly what backs USDT.

That scrutiny might become standard practice.

Also Read: What Is Liquid Staking In 2025?

What This Means for Stablecoins Overall

This fight goes beyond just Tether. It raises basic questions about stablecoin operations.

Should they stick only to boring, safe assets like government bonds? Or can they smartly branch into volatile assets for better returns and stronger long-term backing?

Traditional finance demands boring stability from anything claiming to equal a dollar. Crypto always plays by different rules.

S&P Global recently handed USDT its lowest stability rating, worried about growing risk-asset exposure. Rating agencies use conservative methods that might miss operational realities, but they shape institutional views.

The fight boils down to acceptable risk levels for something marketed as stable. Smart people disagree here.

What to Watch Next?

Monitor several things over the coming months.

Check Tether’s asset mix in quarterly reports. Are they adding more Bitcoin and gold, or backing off after criticism?

Watch Bitcoin and gold prices. If we see 20%+ coordinated drops, Hayes’s theory gets tested live.

Track redemption patterns. Big sustained outflows signal institutions losing faith. Right now, USDT circulation keeps climbing past $183 billion.

Regulatory changes matter hugely too. How Tether adjusts to evolving compliance standards could reshape everything.

For now, USDT holds its peg and works normally across hundreds of exchanges. Crypto infrastructure still runs on Tether, whether critics like it or not.

But Hayes put everyone on notice. The risks exist, even if they’re not immediate. In crypto, where surprises happen fast, that awareness matters.

Also Read: AI Agents for Automated Yield Farming: The Future of Passive Income in DeFi

What assets does Tether hold to back USDT? 

Around $140 billion in cash equivalents like U.S. Treasuries, plus $9.9 billion in Bitcoin, $12.9 billion in gold, and roughly $18 billion in loans and other investments.

Could Tether actually go insolvent? 

Theoretically possible under extreme conditions, but Tether keeps significant reserves and makes billions in annual profits. Insolvency needs major simultaneous drops in Bitcoin and gold.

How does the BitMEX warning affect regular USDT users? 

Nothing changes immediately. USDT works normally with strong liquidity. But the warning shows risks to consider for large holdings or during potential crashes.

What separates Tether from other stablecoins? 

Tether puts more reserves into volatile assets like Bitcoin and gold versus competitors. This approach might deliver higher returns but adds risk compared to purely Treasury-backed options.

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