S&P Global Ratings has downgraded Tether's USDT, citing significant Bitcoin reserves, currently exceeding the agency's safe threshold, as a destabilizing factor in crypto economies.
The rating downgrade highlights potential risks in stablecoin reserves, influencing market perceptions and potentially impacting USDT's role in digital finance.
S&P Global Ratings Downgrade
S&P Global Ratings downgraded Tether’s USDT stability rating to "weak", citing rising Bitcoin holdings as a primary concern. Tether holds over 87,000 BTC, comprising 5.6% of its reserves, surpassing S&P’s recommended threshold of 3.9%.
Tether CEO Responds to Downgrade
Paolo Ardoino, Tether CEO, responded to the downgrade, dismissing it via his Twitter. He argued that traditional rating models are ineffective for stablecoins and highlighted Tether's financial health, including $13 billion profits reported for 2025.
"We wear S&P's criticism with pride; traditional rating models built for legacy financial institutions have historically failed." - Paolo Ardoino, CEO, Tether
Reserve Risk and Market Impact
The downgrade raises concerns about Tether's reserve capabilities if Bitcoin prices drop further. Despite this, USDT circulation grew by $1 billion in November, suggesting continuous demand amidst market uncertainty.
The downgrade also emphasizes Bitcoin's volatility as a significant factor affecting Tether’s stability. This comes amid a broader market context with $3.5 billion outflows from Bitcoin ETFs, aggravating price declines.
Tether's Diversified Reserves and Broader Context
Tether’s diversified reserves aren’t limited to Bitcoin but include substantial gold and secured loans. Market scrutiny aligns with previous sector instability, echoing past troubles like the Terra/LUNA collapse which strained stablecoin reliability.
Tether’s situation underscores ongoing regulatory and financial debates over stablecoin reserve strategies. Potential regulatory actions could shift market dynamics further, affecting investor confidence and the broader crypto ecosystem.