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S&P Global Ratings just delivered the kind of reality check that could reshape how investors think about Tether's USDT, downgrading the token's ability to hold its dollar peg to the firm's weakest stability tier. The timing could be uncomfortable: Bitcoin (BTC-USD) is on track for its roughest month since the 2022 wave of crypto bankruptcies, and that slump is hitting right as USDT supply has grown by roughly $1 billion in November to $184.4 billion. For a stablecoin built to be the calm center of crypto flows, the rating revision introduces a new tension around how its reserve mix might behave if volatility deepens.
Analysts Rebecca Mun and Mohamed Damak said the downgrade reflects a shift in USDT's reserve profile over the past year, where exposure to higher-risk assets including Bitcoin, gold, secured loans, and corporate bonds has climbed alongside what they view as limited disclosure. Their report flagged that Bitcoin now accounts for about 5.6 percent of USDT in circulation, a level that exceeds the 3.9 percent overcollateralization margin. In their view, that dynamic could be enough to prevent the reserve from fully absorbing a further decline in Bitcoin's value. They also warned that a simultaneous drop across other risk-sensitive assets could push the stablecoin into an undercollateralized position, raising fresh questions about the strength of the peg.
S&P's note pointed to additional vulnerabilities, from limited transparency on reserve management to the lack of asset segregation in an insolvency scenario and constraints around redeeming USDT directly with Tether. The company pushed back hard, saying the assessment relies on a legacy framework that does not capture the scale or macro relevance of digitally native money. Tether emphasized its quarterly independent attestations since 2021 and said it has never refused a redemption request from a verified user, arguing that the data demonstrates what it views as USDT's resilience, transparency, and global utility.
This article has been published in GuruFocus via Yahoo News.
Tether on Thin Ice: S&P Slaps USDT With Worst-Ever Stability Rating
A Bitcoin crash, high-risk reserves, and a brutal downgrade--Tether's $184B empire just hit a credibility cliff.
finance.yahoo.com
