Arthur Hayes Warns Tether ‘Macro Hedge’ Risks Equity Wipeout in 30% Bitcoin Correction

Core Insights - Tether faces potential balance-sheet insolvency if its Bitcoin and gold reserves experience a 30% drawdown, according to Arthur Hayes [1] - Hayes critiques Tether's asset allocation, highlighting a significant shift towards non-fiat collateral, with $12.9 billion in precious metals and $9.9 billion in Bitcoin [2] - The strategy is seen as an "interest rate trade," anticipating Federal Reserve rate cuts that could reduce interest income from US Treasury bills [3] - This allocation introduces asymmetric risk, potentially exceeding Tether's surplus capital and leading to theoretical insolvency despite operational liquidity [4] - Hayes warns that large holders may demand real-time balance sheet assessments to ensure the safety of the USDT peg, coinciding with S&P Global's low rating for USDT [5] Industry Response - Industry stakeholders argue that the insolvency thesis misinterprets balance sheet accounting versus actual liquidity risk [6] - CEO of UQUID Card, Tran Hung, defends Tether, stating that the majority of its $181.2 billion balance sheet is in highly liquid, low-risk instruments, including $112.4 billion in US Treasury Bills [6][7] - Hung asserts that Tether's liquidity wall is sufficient to cover most USDT in circulation, maintaining full redeemability even in market downturns [8]