Tether bets on Bitcoin and gold in preparation for interest rate cuts, Arthur Hayes: a 30% drop in shareholder equity will drop to zero.

The credit rating agency Standard & Poor's Global (S&P Global) recently downgraded Tether's USDT stability assessment to the lowest level of level 5. The main reason is the rising proportion of high-risk assets in USDT reserves, raising concerns that there may not be enough buffer to absorb the fall in Bitcoin. BitMex founder Arthur Hayes strongly agrees, believing that Tether is making a massive bet on the possibility of a rate cut by The Federal Reserve (FED), as this would significantly reduce their interest income. They are buying gold and Bitcoin, but if these assets fall by 30%, the shareholders' equity will drop to zero!

(Bitcoin exposure exceeds the safety margin, and S&P downgraded USDT to the lowest rating for stablecoins )

Tether is betting big on The Federal Reserve (FED) cutting interest rates.

Arthur Hayes believes that the Tether team is in the early stages of large-scale interest rate trading. The Federal Reserve (FED) cutting interest rates will significantly reduce their interest income, and to cope with this situation, they are buying gold and Bitcoin. Because theoretically, during a rate cut phase, the prices of gold and Bitcoin should soar.

The Tether folks are in the early innings of running a massive interest rate trade. How I read this audit is they think the Federal Reserve (FED) will cut rates which crushes their interest income. In response, they are buying gold and $BTC that should in theory moon as the price of money falls.… pic.twitter.com/ZGhQRP4SVF

— Arthur Hayes (@CryptoHayes) November 29, 2025

Gold and Bitcoin fall by 30%, will Tether's shareholder equity drop to zero?

But Hayes also pointed out that if gold and Bitcoin drop by 30%, Tether's shareholders' equity would be wiped out, and at that time, USDT would theoretically go bankrupt. He believes that some major shareholders and exchanges will demand to see their balance sheets immediately to assess Tether's solvency risk. Mainstream media will report extensively on this and criticize Lutnick and Cantor for supporting this stablecoin.

Shareholder equity drop to zero? What is the reason behind it?

In fact, Hayes's remarks echo the reasons for S&P's downgrade of USDT to the lowest rating for stablecoins. S&P pointed out in its report:

“Bitcoin currently accounts for about 5.6% of the USDT circulation, exceeding the 3.9% excess collateral safety margin, which means that the reserves can no longer fully absorb the impact of Bitcoin's decline. The decline in the value of Bitcoin and other high-risk assets may reduce the coverage of the reserves, leading to insufficient collateral for USDT.”

Because Tether has always highlighted transparency reports through over-collateralization, as of September 30, 2025,

Total assets are 174,356,634,812 USD

Total liabilities are USD 174,445,364,503.

Because assets exceed liabilities, Tether refers to this as over-collateralization. The difference between assets and liabilities is listed as shareholders' equity on a traditional balance sheet, amounting to approximately USD 6.78 billion, with an over-collateralization rate of 3.9%.

According to Hayes's theory, if both Bitcoin and gold fall by 30%, it will result in an unrealized loss of 6.83 billion USD, meaning that shareholder equity will drop to zero!

Tether uses profits to buy Bitcoin and gold, what are the hidden risks behind imperial expansion?

But in fact, Tether does not purchase Bitcoin or gold out of thin air; these purchasing activities stem from its profits and excess reserves, rather than newly issued USDT. One can only say that Tether continuously leverages its profits to expand into other territories, but if these territories generate significant losses, will it affect its stablecoin's core business? This may be the risk behind its imperial expansion.

In fact, Tether has become the largest holder of gold outside of central banks this year. Some analysts also believe that the true purpose of Tether's aggressive buying may be to bet on “gold tokenization” becoming the next crypto narrative.

(Tether becomes the world's largest independent holder of gold, aiming to create a “gold-backed” cryptocurrency system)

This article Tether bets on Bitcoin and gold in preparation for interest rate cuts, Arthur Hayes: a 30% fall in shareholder equity will drop to zero. Originally appeared in Chain News ABMedia.