Asia Morning Briefing: The Tether Discussion This Year Is a Healthy Sign

For years, the crypto industry has argued over the quality of Tether’s reserves—often with more drama than detail—but this latest round of scrutiny is more pointed and substantially more informed.

Tether has once again taken center stage as traders revisit a recurring question: Is the world’s largest stablecoin truly as strong as its balance sheet suggests?

The debate itself is not new. For a long time, so-called “Tether truthers”—usually critics of the entire crypto ecosystem—pushed theories claiming USDT was artificially inflating the market and predicting bitcoin would collapse once Tether fell apart.

What’s different this time is the source of the criticism. The renewed skepticism is coming from credible market participants rather than fringe detractors, revealing a more meaningful divide over how to assess Tether’s financial resilience.

BitMEX founder Arthur Hayes argues that Tether’s growing exposure to bitcoin and gold makes it vulnerable, particularly if those assets drop sharply and eat into the company’s reported equity cushion.

But Joseph Ayoub, formerly Citi’s head of crypto research, says Hayes’ view relies on an incomplete picture. Tether’s disclosed reserves, he argues, do not include the broader corporate balance sheet—encompassing equity stakes, mining operations, corporate reserves, and one of the largest cash-generating Treasury portfolios in the world. Taken together, Ayoub says, Tether appears to have ample capacity to absorb market losses.

The more practical concern, however, is not solvency but liquidity.
Tether maintains limited cash and relies on constrained banking rails, raising questions about how quickly it could convert non-cash assets if a rapid surge in redemptions occurred.

USDT’s backing is concentrated in short-dated Treasuries, reverse repos, money market funds, gold, and bitcoin. These are robust assets, but they cannot all be liquidated instantly—especially during simultaneous market stress.

Historically, this hasn’t been an issue. Redemptions tend to be small, as most USDT users keep the token circulating within crypto markets rather than cashing it out into fiat.

The real test would come if this pattern breaks. A major shock in Asia’s trading centers or a regulatory event in offshore markets could spark an outsized wave of redemptions that challenges Tether’s ability to unwind positions and move dollars efficiently through its banking partners.

One of Tether’s biggest stress tests occurred in 2022, when it processed more than $2 billion in redemptions in a single day, all at par for verified customers.

Tether cites this episode as proof that its reserves can be mobilized even during extreme volatility. Yet that event still doesn’t resolve how USDT would perform during a prolonged, chaotic redemption cycle.

Tether continues to dismiss criticisms, insisting that detractors consistently overlook the stronger fundamentals reflected across its full balance sheet.

What makes this year’s debate significant is its tone: grounded, analytical, and free from conspiracy. The discussion is now driven by traders, analysts, and builders who rely on USDT daily and who are examining its liquidity and balance-sheet dynamics with professional, rather than ideological, scrutiny.

There is no chatter about imminent collapse—just a serious evaluation of reserves, liquidity mechanics, and market structure. And as USDT becomes increasingly central to Asia’s trading flows, this may be the level of scrutiny the market truly needs.

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Market Movement

BTC
Bitcoin is trading near $86,436, rebounding from a drop toward $84,000 during the U.S. session after hawkish signals from the Bank of Japan pressured risk assets.

ETH
Ether trades around $2,794 and remains under sustained selling pressure, with treasury-linked ETH plays sliding over 10% during Monday’s crypto-stock sell-off.

Gold
Gold opened at $4,218.50, briefly approached $4,300, and climbed as investors de-risked amid falling crypto and equity futures. Markets are now pricing an 87.6% probability of a Fed rate cut next week.

Nikkei 225
Japan’s Nikkei 225 rose 0.54%, led by financials, energy, and materials. Industrial names such as Fanuc and NGK Insulators gained even as JGB yields hit multi-decade highs.

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