Tether had appeared to be booming recently with huge proffits and massive investment.
What changed
According to S&P, Tether’s backing is now too risky: some 24% of its reserves aren’t safe, things like corporate debt, secured loans, gold, and even Bitcoin.
That includes about 5.6% in Bitcoin alone, and that alone already blows past the safety buffer for over-collateralization.
On top of that: limited transparency. S&P says there’s no clear public breakdown of custodians, counterparties or how Tether handles reserve liability if things go sideways.
What that means: de-pegging risk is real now
If prices of volatile assets (Bitcoin, high-risk bonds, etc.) tumble, USDT could end up undercollateralized — meaning the $1 peg might not hold.
Given USDT’s global use in exchanges, DeFi, and as a dollar stand-in in many emerging markets, this isn’t just some technical footnote — it could spark serious liquidity stress.
Tether pushes back, but the facts remain
Tether’s leadership fired back hard. They called S&P’s downgrade “misguided,” a relic of “legacy finance” logic that misunderstands what stablecoins are.
They pointed out:
US Treasuries still form the bulk of reserves.
The firm remains profitable.
USDT has survived past crises without ever failing redemptions, even during market crashes, exchange failures and banking panics.
But ignoring those facts doesn’t erase the structural risk S&P highlighted.
Bottom line: this could be a turning point
Markets may treat this as “just another crypto scare," or they might finally start rethinking how “stable” USDT really is.
If enough users and institutions lose confidence, it could force a scramble for liquidity, rising redemption pressure, and widespread contagion across the crypto ecosystem.
Or maybe USDT survives, but with a higher price for staying afloat: more transparency, reserve restructuring, or even regulatory scrutiny, saving the dollar peg but cuttimg intomproffits.