The Biggest Risk in Crypto No One Wants to Talk About
A single document released on November 26 has reopened the most uncomfortable question in crypto: how stable is the world’s biggest stablecoin really?
- S&P gave USDT its lowest stability score, citing the imbalance between Bitcoin exposure and reserve protection.
- Allocation to higher-risk assets continues to increase while full transparency still hasn’t arrived.
- Whether anything changes depends not on Tether’s response — but on how the market reacts.
S&P Global Ratings delivered the answer with no ambiguity. In its newest assessment, the agency pushed USDT into its lowest stability tier, a category labeled “Weak.” For a token that underpins trading pairs across centralized exchanges, settlement rails in DeFi, and dollar access in emerging economies, the downgrade marks a turning point.
The Cushion Isn’t Big Enough
Analyst Shanaka Anslem Perera didn’t mince words in his breakdown of S&P’s decision. He highlights a dramatic imbalance inside Tether’s reserves — the size of the company’s Bitcoin position now exceeds the capital buffer designed to absorb portfolio losses. If Bitcoin were to suffer a sizable correction, the structure supporting USDT’s peg could be tested immediately.
Perera described it as “a stability framework where the riskiest component outweighs the protection layer,” calling it a systemic warning rather than a routine observation.
Critics Were Early — the Market Ignored Them
It wasn’t the first time Tether’s backing had been scrutinized. New York regulators previously found that USDT was fully backed only a minority of the days they evaluated. The CFTC later imposed a significant penalty for representing reserves as dollar-only when other assets were being used.
Despite the controversy, USDT didn’t fade — it became the preferred settlement asset for global crypto trading. Whether on DEXs, centralized exchanges, or fintech apps in regions experiencing currency instability, usage soared uninterrupted.
Rising Risk Instead of Rising Transparency
S&P’s issue is not simply the presence of Bitcoin. The rating agency noted a broad shift toward higher-risk reserves, including gold, loans and corporate debt — growing from 17% to 24% in just twelve months. Meanwhile, the transparency gap remains unchanged: no full audit, no breakdown of custodians, and no legal clarity on the fate of collateral in an insolvency scenario.
Perera raised a point that may sting the most — many of USDT’s users rely on it as their dollar replacement, yet have no visibility into the health of the reserves backing it.
A Defiant Response — and an Uncertain Aftermath
Tether’s CEO Paolo Ardoino dismissed the downgrade as hostility from the legacy financial world, claiming the rating validates the need for a new economic model. He maintained that Tether is profitable and overcapitalized.
But Perera suggests a larger shift is already in motion. Regardless of Tether’s public stance, the first independent rating of USDT now exists — and confidence, not statements, determines the fate of a stablecoin.
A token clearing more than $100 billion in transactions daily does not need a bank run to feel pressure. A marginal pullback from exchanges, market makers or OTC desks is enough to rewrite liquidity conditions across crypto.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
