Arthur Hayes Warns of Tether’s Risky Interest Rate Trade
Arthur Hayes, the co-founder of BitMEX, has sounded the alarm on Tether’s interest rate trade, warning that it could threaten the solvency of the USDT stablecoin if markets move against the issuer. According to Hayes, a 30% drop in Tether’s Bitcoin and gold holdings could erase its equity, leaving USDT potentially insolvent.
Hayes analyzed Tether’s latest attestation report, which reveals that the company holds $9.86 billion in Bitcoin and $12.92 billion in precious metals. He argues that Tether’s interest-rate strategy, which involves buying gold and Bitcoin in anticipation of Federal Reserve rate cuts, may strain USDT solvency. The company’s reserves, which stand at $181.22 billion, are dominated by U.S. Treasuries, with $112.42 billion in holdings.
Tether’s Balance Sheet Math Under Scrutiny
Hayes questions Tether’s balance sheet math, suggesting that the company’s assets may not be sufficient to cover its liabilities. “The Tether folks are in the early innings of running a massive interest rate trade,” he wrote on X. “They are buying gold and BTC that should in theory moon as the price of money falls.” However, if the price of Bitcoin and gold were to drop by 30%, Tether’s equity cushion would be eliminated, leaving USDT potentially insolvent.
Hayes predicts that large USDT holders and exchanges will demand real-time balance sheet access to monitor solvency risks. He also expects the mainstream media to scrutinize Tether’s strategy, saying “Get out your popcorn, I expect the MSM to run wild with this.” One X user defended Tether’s strategy, explaining that Bitcoin and gold purchases come from profits and excess reserves rather than newly issued USDT. However, Hayes remains skeptical, questioning why Tether’s cash assets are less than its outstanding liabilities.
Tether Shuts Down Uruguay Mining Operations
In other news, Tether has confirmed that it is closing its mining venture in Uruguay due to failed electricity pricing negotiations. The company will let go of approximately 30 staff members in the country as the business winds down. Tether’s total reserves, which back circulating tokens, stand at $181.22 billion, with U.S. Treasury bills comprising the largest asset category at $112.42 billion. The company also holds $17.99 billion in overnight reverse repurchase agreements and $6.41 billion in money market funds.
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