For years, the crypto market has sparred over the quality of Tether’s reserves—often with more drama than detail—but the latest round of debate is sharper and far more substantive.

Tether has returned to center stage as traders revisit the familiar question: Is the world’s largest stablecoin as solid as its balance sheet implies?

This isn’t a new narrative. Historically, “Tether truthers”—typically skeptical of crypto altogether—have floated conspiracy theories suggesting USDT was artificially propping up the market, warning that bitcoin would collapse once Tether imploded.

What’s different now is the source of criticism. The renewed scrutiny is emerging not from fringe detractors but from credible market participants, highlighting a deeper divide over how to evaluate Tether’s financial strength.

BitMEX founder Arthur Hayes argues that Tether’s rising allocation to bitcoin and gold increases its vulnerability, especially if those assets decline and erode the firm’s reported equity buffer.

But Joseph Ayoub, former head of crypto research at Citi, counters that Hayes’ interpretation is incomplete. Tether’s published reserve data, he says, doesn’t capture the full corporate balance sheet, which includes operating businesses, corporate equity, mining ventures, and one of the world’s largest cash-generating Treasury portfolios. Taken together, Ayoub argues, Tether has substantial capacity to absorb losses.

A more practical concern focuses not on solvency but on liquidity.
Tether holds limited cash and operates through constrained banking rails, prompting questions about how quickly it could liquidate non-cash assets during a severe redemption spike.

Most of USDT’s backing is held in short-term Treasuries, reverse repos, money market funds, gold, and bitcoin. While these are highly valuable, they are not all immediately liquid—especially in a multi-market stress event.

Under normal conditions, this isn’t a problem. USDT redemptions tend to be modest because the majority of users recycle the token within crypto trading venues rather than cashing it out to fiat.

The bigger unknown is what happens if that behavior shifts. A major shock in Asia’s trading centers or a regulatory disruption in offshore markets could trigger redemption waves that test Tether’s ability to unwind assets and move dollars through its banking partners.

One of Tether’s most significant stress events occurred in 2022, when the company processed more than $2 billion in redemptions in a single day—all at par for verified customers.

Tether points to this as proof that its asset base remains highly mobilizable even under extreme volatility. However, that episode doesn’t fully answer how USDT would perform during a prolonged or disorderly redemption cycle.

The company continues to dismiss negative assessments, saying critics overlook the broader strength of its financial position.

What makes this year’s debate notable is its grounded, professional tone. Instead of conspiracy-driven panic, the conversation now involves traders, analysts, and builders who rely on USDT daily and are evaluating its balance sheet and liquidity dynamics with clear pragmatism.

There’s no talk of imminent collapse—just a mature discussion about reserves, liquidity, and market infrastructure. And as USDT becomes more deeply embedded in Asia’s trading flows, this level of scrutiny may be exactly what the ecosystem needs.

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Market Movement

BTC:
Bitcoin trades around $86,436, recovering from a dip toward $84,000 during the U.S. session as hawkish signals from the Bank of Japan weighed on risk assets.

ETH:
Ether sits near $2,794, remaining under selling pressure as treasury-linked ETH plays fell over 10% during Monday’s crypto-stock downturn.

Gold:
Gold opened at $4,218.50, briefly approached $4,300, and climbed as traders de-risked amid falling futures and rising expectations—now at 87.6%—for a Fed rate cut next week.

Nikkei 225:
Japan’s Nikkei 225 gained 0.54%, led by financials, energy, and basic materials. Industrial names including Fanuc and NGK Insulators rallied even as JGB yields hit multi-decade highs.