Tether: Insufficient Reserves or a Clever Strategic Move?

When we observe the stablecoin Tether, we usually think of it as a bridge between the dollar and the blockchain. However, the reality is more complicated. It is not just a technical intermediary – it is a powerful element of crypto infrastructure, whose strategic decisions can shake the entire market.

When did revenues reach their peak?

Over the past few years, Tether has operated like a perfect money-making machine. USDT holders received a 0% return, while Tether invested about 1 trillion dollars in U.S. Treasury bonds with approximately 5% yield. This meant a pure profitability of around 10 billion dollars in 2025.

Additionally, there is a simple fact: each percentage point of Treasury bond yields brought Tether about 1 billion dollars in annual income. For comparison, Circle – the second-largest stablecoin issuer – lost 202 million dollars net during the same period.

However, modeling Treasury bonds with a profit calculator requires considering changes in the macroeconomic environment. CME FedWatch data suggest over a 75% probability that the federal funds rate will fall from the current 3.75–4% to the 2.75–3.50% range by December 2026. This is not the 5% on which Tether based its strategy.

The problem that comes with rate cuts

A one percentage point decrease in yield means a loss of at least 1 billion dollars per year for Tether. With a potential drop of 1.5–2 percentage points, we are talking about a reduction in income of 15–20 billion dollars.

This means that the business model, which functioned flawlessly in recent years, becomes less profitable. Tether understood this – hence the sudden change in investment strategy, which has now appeared in reserve reports.

Gold and Bitcoin instead of bonds – why now?

Between Q3 2023 and Q3 2025, Tether’s balance sheet underwent a transformation. As of September 30, 2025, Tether had accumulated:

• Over 100 tons of gold – worth about 13 billion dollars
• Over 90,000 BTC – worth nearly 10 billion dollars

Together, these constitute 12–13% of total reserves. In comparison, Circle holds only 74 bitcoins.

Why these assets? The logic is simple: when yields fall, gold historically performs well. This year, after the Fed’s rate cut, gold prices increased by over 30% in four months. Bitcoin shows similar traits – it reacts with growth to liquidity expansion.

In this way, Tether is preparing for a low-interest-rate world. When income from Treasury bonds declines, unrealized gains from gold and Bitcoin can help offset the loss.

But the risk is growing

S&P Global Ratings recently downgraded Tether’s ability to maintain the USDT-dollar peg from level 4 (limited) to level 5 (weak). The agency pointed out that high-risk assets – corporate bonds, metals, Bitcoin, and loans – already constitute 24% of reserves.

Even more concerning is this fact: Bitcoin accounts for about 5.6% of USDT in circulation, exceeding the 3.9% reserve excess. In other words, reserves can no longer fully absorb a significant decline in Bitcoin’s value.

S&P warns directly – if Bitcoin drops sharply, combined with depreciation of other risky assets, it could weaken the reserve coverage ratio and threaten the USDT peg.

Strategy or threat?

On one hand, the decision to diversify reserves by introducing gold and Bitcoin seems rational. The world will soon enter a phase of low interest rates, and the profit calculator for Treasury bonds will show much weaker numbers.

On the other hand – the primary function of a stablecoin issuer is to protect the peg to the base currency. Everything else, including profits or potential asset value increases, is secondary.

Tether’s story will develop alongside the Federal Reserve’s decisions in the coming months. The upcoming era of cheap money will be a crucial test for this crypto giant.