S&P Downgrades Tether to ‘Weak’ as Bitcoin Exposure Swells
S&P Global Ratings downgraded Tether (USDT) to its lowest stability assessment Wednesday, warning that the stablecoin’s growing appetite for volatile reserve assets has compromised its safety cushion.
The agency cut USDT from ‘constrained’ (4) to ‘weak’ (5), citing a reserve composition that now relies too heavily on Bitcoin and alternative investments rather than cash equivalents.
Despite the report, USDT held its peg, trading at $1.00 at press time.
The Math: 5.6% > 3.9%
The core of S&P’s argument is simple arithmetic. Tether’s Bitcoin holdings now represent 5.6% of all USDT in circulation. However, the company’s overcollateralization margin—the “rainy day” fund meant to absorb losses—sits at just 3.9%.
If Bitcoin tanks, that buffer vanishes.
“A drop in the bitcoin’s value combined with a decline in value of other high-risk assets could therefore reduce coverage by reserves and lead to USDT being undercollateralized,” S&P analysts Rebecca Mun and Mohamed Damak wrote.
Risky assets—including Bitcoin, gold, corporate bonds, and secured loans—now make up 24% of Tether’s reserves, up from 17% a year ago.
“We Wear Your Loathing With Pride”
Tether executives wasted no time firing back. CEO Paolo Ardoino dismissed the rating as a relic of an obsolete financial system.
“We wear your loathing with pride,” Ardoino posted on X. “The classical rating models built for legacy financial institutions historically led private and institutional investors to invest their wealth into companies that… ultimately collapsed.”
Tether argues the agency ignores the firm’s massive profitability—over $10 billion in net profit YTD 2025—which theoretically adds to its capital buffer, even if not officially counted as collateral in S&P’s strict framework.
The Outlook
The downgrade highlights a widening philosophical gap. S&P demands T-Bills and transparency; Tether prioritizes sovereignty and diversification into commodities like gold.
For now, the market sides with Tether. The stablecoin’s market cap remains near record highs ($184B), and redemptions are processing normally.
