For years, the crypto industry has argued over the quality of Tether’s reserves—often loudly and with more speculation than evidence. But the latest round of scrutiny is far more focused, more informed, and ultimately more useful than past cycles of criticism.

Tether has once again become the center of market debate, as traders revisit the long-standing question: Is the world’s dominant stablecoin as secure as its balance sheet suggests?

The skepticism isn’t new. Earlier waves of criticism came mostly from fringe skeptics who accused Tether of manipulating crypto prices and warned that bitcoin would collapse once USDT unraveled. Those theories rarely gained traction beyond online forums.

What sets this year’s debate apart is the credibility of the participants. The questions are coming from respected market figures, highlighting a deeper divide over how to measure Tether’s financial strength.

BitMEX founder Arthur Hayes argues that Tether’s rising exposure to bitcoin and gold increases its vulnerability during market downturns, potentially eroding the equity cushion it reports in its disclosures.

Joseph Ayoub, formerly Citi’s crypto research lead, disputes that view. Hayes, he says, is analyzing only Tether’s reserve attestation—not its broader corporate balance sheet. When accounting for Tether’s operating businesses, mining ventures, equity interests, and massive Treasury-yielding portfolio, Ayoub argues the company appears well-equipped to absorb volatility.

Beyond solvency, some analysts are turning their attention to liquidity risk.
Tether maintains limited cash balances and relies on narrow banking channels, prompting questions about how rapidly it could convert its non-cash holdings if redemptions spike.

The bulk of USDT’s reserves sit in short-dated Treasuries, reverse repos, money market funds, gold, and bitcoin. While these are high-quality assets, they cannot all be liquidated instantly—especially if several markets face stress at the same time.

Under typical conditions, this hasn’t been an issue. Most USDT circulates within crypto markets rather than being redeemed for dollars, keeping daily redemption flows manageable.

The real test would come if that pattern breaks. A regulatory shock in offshore hubs or a sudden disruption in Asian trading centers could trigger large redemptions that stretch Tether’s ability to unwind positions and navigate its limited banking rails.

Tether notes that it has managed extreme scenarios before—most notably in 2022, when it processed more than $2 billion in redemptions in a single day and honored all requests at par for verified customers. But that event, while significant, does not definitively answer how USDT would perform in a prolonged, chaotic redemption cycle.

The company continues to reject negative assessments, arguing that critics overlook the broader strength of its consolidated balance sheet and the revenue generated by its Treasury holdings.

What makes the current debate constructive is its tone. Rather than conspiracy-driven claims of hidden insolvency, the conversation now involves traders, analysts, and market builders who rely on USDT daily. They are examining liquidity, reserves, and operational mechanics with a level of seriousness rarely seen in earlier Tether discussions.

It is no longer a debate about imminent collapse, but about understanding balance-sheet dynamics and market plumbing. And as USDT becomes even more central to Asia’s trading ecosystem, this kind of scrutiny may be not only healthy but necessary.

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Market Movement

BTC:
Bitcoin is trading near $86,436, rebounding from a brief drop toward $84,000 after hawkish remarks from the Bank of Japan pressured global risk assets.

ETH:
Ether sits around $2,794, continuing to face selling pressure as treasury-linked ETH tokens slid more than 10% during Monday’s crypto-equity downturn.

Gold:
Gold opened at $4,218.50, neared $4,300, and climbed as traders reduced risk exposure and priced in an 87.6% probability of a Fed rate cut next week.

Nikkei 225:
Japan’s Nikkei 225 rose 0.54%, led by gains in financials, energy, and materials. Industrial names like Fanuc and NGK Insulators advanced despite JGB yields reaching multi-decade highs.