🧐Regarding the panic over USDT's potential collapse, it is essentially a collective anxiety stemming from a "lack of financial knowledge"｜Analyzing the possibility of Tether's collapse!
It may be due to S&P downgrading Tether (USDT) that there has been a lot of discussion recently about whether Tether $USDT will collapse, with increasingly extreme viewpoints:
Some say it is just a huge Ponzi scheme that will eventually fail; others argue that "it is definitely safe given its size."
In my view, both judgments are not rigorous.
Below, I will analyze this topic layer by layer:
How might it fail, which concerns are valid, which are exaggerated, and: where the real risks worth being vigilant about lie.
1️⃣ First, let's clarify "collapse": How might USDT fail?
For a fiat-collateralized stablecoin, "collapse" typically does not mean an instant drop to zero like algorithmic stablecoins, but rather resembles the following scenarios:
1) Insolvency (insufficient reserves) - asset value < redemption liabilities, ultimately leading to long-term decoupling, suspension of redemptions, or fragmented payouts.
2) Liquidity run (assets may be sufficient, but cannot be liquidated in time or at a discount) - the secondary market decouples first (e.g., 0.97, 0.95), and after market makers/whales redeem for arbitrage, it may recover; however, if redemption channels are blocked or panic is too great, the decoupling may deepen and last longer.
3) Regulatory/ judicial/ sanction impacts (key channels being blocked) - for example, restrictions on key custodians, banking channels, market making/exchange sides, leading to "theoretically sufficient, but practically difficult to redeem."
4) Governance and transparency issues leading to a collapse of confidence - stablecoins fear "everyone suddenly losing trust." Changes in confidence occur faster than changes in assets.
2️⃣ Current viewpoints: Which are "correct," and which "may be exaggerated"?
1) "Seigniorage/ float income is very high" - basically valid
The typical business model of stablecoin issuers is:
Users exchange 1 dollar for 1 USDT → the issuer uses this "float" to buy government bonds/ repurchase agreements/ money market funds and other interest-bearing assets → interest income goes to the issuer (not to the holders).
For example, in Tether's report for Q3 2025 (as of 2025-09-30), it disclosed that its profits for the year were quite substantial (the company emphasizes profit records).
This is not "illegal"; it is part of the business; however, it does create a moral intuition of "why am I holding a stablecoin without earning interest."
In traditional finance, a similar situation exists with money market funds/bank deposits, where the distribution of income differs: money market funds pass on earnings to holders, while bank deposits pay interest, whereas stablecoins generally do not directly provide interest (some compliant products may offer it in other forms).
2) "Using depositors' money to gamble on BTC and gold" - directionally correct, but needs more precise wording
Here are the hard facts: Tether's reserves do indeed include Bitcoin and gold.
In the Financial Figures & Reserves Report issued by BDO Italia for 2025-09-30, Tether disclosed the composition of its reserves supporting fiat stablecoins (in USD) as follows:
Total cash/cash equivalents/short-term deposits: approximately $139.95 billion (about 77.2%)
Among which:
• US short-term Treasury bills (<90 days) approximately $112.42 billion;
• Reverse repos (overnight + term) approximately $21.05 billion; money market funds approximately $6.41 billion;
Cash and bank deposits approximately $0.30 billion, etc.
Secured loans: approximately $14.60 billion (about 8.1%)
Precious metals (gold): approximately $12.92 billion (about 7.1%)
Bitcoin: approximately $9.86 billion (about 5.4%)
Other investments: approximately $3.87 billion (about 2.1%)
Very few corporate bonds (in the tens of millions).
At the same time, this report disclosed: total assets (reserves) approximately $181.22 billion, total liabilities approximately $174.45 billion, with excess (equity) approximately $6.78 billion.
Thus, USDT's "reserve asset pool" is not 100% cash/short-term debt; it includes higher-risk or less transparent assets like gold, Bitcoin, and secured loans.
This is a fact.
"Leverage": currently, public materials do not equate, but there is "implied risk amplification"!
"Leverage" strictly speaking is: borrowing money to increase positions (amplifying risk on the asset side, with additional debt on the liability side).
From this reserve report, Tether's main liability is the "redemption liabilities of issued stablecoins," and there is no structure reflected in the report indicating "additional borrowing to leverage buy BTC/gold."
However, two points may create a "leverage-like" sensation:
As a holder, you do not receive the gains from the rise in BTC/gold, but in extreme cases, you may bear the tail risk from declines (decoupling/difficulty in redemption). This means "upside goes to the company/shareholders, while downside is shared by holders," creating structural asymmetry.
The equity buffer is not particularly thick: as of 2025-09-30, excess/equity is approximately $6.78 billion, which is about ~3.9% buffer against $174.45 billion in liabilities.
This means: once the risk asset portfolio experiences a few percentage points to over a dozen percentage points of loss in a stressed scenario, it could theoretically eat into the buffer, triggering confidence issues regarding "sufficiency."
3️⃣ More critical risk points: it is not about "whether there is BTC/gold," but these three things
A. Liquidity and "run mechanism" risk
You may not be able to directly redeem 1:1 dollars from Tether.
Tether's official redemption requirements: account verification + minimum redemption amount of $100,000 equivalent.
This means that a large number of retail investors' "redemptions" actually occur in the secondary market on exchanges/blockchains, with price stability highly dependent on market makers and large holders arbitraging. In a bank run, small depositors can withdraw cash directly; in a stablecoin run, small holders often can only sell in the market, and during decoupling, they will face discounts.
Historically, USDT has experienced brief decoupling during market stress but has also undergone large-scale redemptions and continued to operate: for example, during the market turmoil in May 2022, media reported that it experienced redemptions/withdrawals amounting to several billion dollars.
This indicates it has "withstood some pressure," but does not mean it will "always withstand it."
B. Transparency: Insufficient "audit/regulatory framework/asset isolation" leading to confidence vulnerability
Tether's current public materials primarily consist of quarterly attestations, not complete audit reports; moreover, the attestation reports themselves emphasize limitations: they confirm a snapshot at a certain point in time and do not cover abnormal market conditions, key custodial/transaction counterparty liquidity, etc.
S&P recently downgraded its stability assessment of Tether, directly pointing to several key issues:
• Increased proportion of risk assets;
• Limited transparency regarding reserve management and risk appetite;
• Lack of a sound regulatory framework;
• Lack of asset isolation to combat issuer bankruptcy risk;
• Absence of complete audits.
Additionally, Reuters reported that Tether is in discussions with the "Big Four" accounting firms regarding audits (but did not provide a clear timeline).
If high-quality audits are indeed completed in the future and continuous disclosures are made, confidence risks will decrease; if this cannot be achieved in the long term, confidence risks will persist.
C. Regulatory and channel risks (especially in Europe)
The EU's MiCA is already reshaping the European stablecoin market, leading to exchanges delisting/restricting non-compliant stablecoins (including USDT) for EU clients.
Such events do not necessarily mean "insolvency," but will bring two real impacts:
• Decreased liquidity in certain regions, increased friction in inflows and outflows → during decoupling, volatility is more likely to be amplified;
• If regulation spreads to more core banking/custodial channels, the risks will be greater.
4️⃣ Returning to "moral evaluation": is this "authentic or not"?
I tend to evaluate it this way:
It captures the core contradiction of the stablecoin business model: holders receive "stability + liquidity convenience," while the earnings (interest/investment returns) are primarily taken by the issuer; once the issuer puts part of the reserves into volatile assets (BTC, gold) or less transparent assets (like secured loans, other investments), the tail risk borne by holders increases.
However, the expression "leveraging to gamble on the market" may be overly sensational: from the public reserve report, what can be confirmed is "there are indeed BTC/gold/loans in the asset portfolio," but it does not directly lead to the conclusion of "additional borrowing to leverage buy."
What truly determines "authenticity" is not whether it makes money, but:
1) Whether risks are disclosed truthfully, continuously, and verifiably (audit/transparency);
2) Whether reserves are conservatively sufficient and liquid enough to withstand runs;
3) Whether assets are isolated, providing holders with clear priority arrangements in the event of issuer bankruptcy.
5️⃣ If you want to "judge the risk of collapse," I suggest monitoring these observable indicators:
This does not involve buy/sell advice, only discussing "how to observe if risks are rising":
1) Whether the proportion of risk assets continues to rise: for example, if the proportions of BTC, gold, secured loans, and other investments continue to increase, while the equity buffer does not expand correspondingly.
2) Changes in the transparency of "Secured Loans": whether the scale, collateral types, and counterparty concentration are disclosed more; otherwise, it remains an "opaque part."
3) Thickness of the equity buffer (excess reserves): as of 2025-09-30, approximately $6.78 billion. The thinner the buffer, the easier it is to be breached by the combination of "asset volatility + confidence run."
4) Whether audit progress is realized: "in discussion" and "completed and continuously published" are two different things.
5) Changes in redemption rules/support chains: for example, it disclosed that starting from 2025-09-01, it will no longer assume redemption obligations for certain USDT on some chains, and from 2025-11-27, it will no longer assume redemption obligations for EURT - this reminds you that the "rights and obligations" of stablecoins can change.
6️⃣ My overall judgment on "whether it will collapse"
Based on the currently available public information, I would describe it as:
The certainty of "direct collapse" in the short term is not high:
In other words: under the premise of "normal market + no systemic regulatory shocks," the probability of USDT experiencing a "direct insolvency-style collapse" in the short term is indeed low;
The bulk of its reserves remains in short-term US Treasuries, repos, money market funds, and other relatively liquid assets; and historically, it has also completed large-scale redemptions during periods of stress.
However, tail risks do exist:
There are indeed substantial amounts of BTC, gold, and secured loans in the reserves; the equity buffer is not particularly thick; transparency and asset isolation issues have been pointed out by rating agencies; and combined with regulatory uncertainties, these all belong to "low-frequency high-loss" risk sources.
Because all assets are the same, the stability of USDT is not guaranteed by "you can always redeem 1:1 for dollars at the counter," but relies on three things working together:
1) Assets genuinely exist
2) Assets are sufficiently liquid
3) The market believes "others also believe it can be redeemed"
As long as the third point is compromised, even if the first two points are fine, the secondary market will face issues first. Understanding this underlying financial logic should clarify that USDT's short-term risk is not "whether it is already insolvent" or even "how much debt it has," but rather "once a run occurs, can it withstand it gracefully."
7️⃣ My advice to everyone:
First, I completely agree that Tether will not face systemic risk in the short term, as their asset structure is more conservative than "many people imagine," and they have historically withstood real stress tests that other stablecoins have not. From this perspective, it is still one of the safest stablecoins currently.
From another dimension, for Tether itself, "stabilizing USDT" is a matter of life and death. The motivation behind this is clear: Tether does not need to rely on "betting on BTC" to make money; the interest from U.S. Treasuries + scale effects already make it a super cash cow, and the profits are terrifying. This business empire is easy to calculate unless it encounters a lunatic or a madman.
However, I still have a few suggestions for everyone—
1) Do not treat USDT as a "risk-free store of value."
It is a trading tool, not a bank deposit. So if you must use stablecoins, it’s best to diversify, investing in assets like $USDT, $USDC, and $DAI, rather than solely relying on USDT.
In extreme cases, you can, like me, sell some stablecoins to invest in the U.S. stock market by purchasing a Nasdaq ETF; I think this is a great choice.
2) What to focus on is not the price, but whether "redemption and channels are smooth":
The real red flag for stablecoins is never 0.998, but changes in liquidity and channels. If problems arise here, and you need to avoid pitfalls, do not hesitate; act decisively.
3) The real systemic risk comes from regulation and confidence, not from the volatility of BTC and gold:
If BTC drops 50%, USDT may not necessarily be affected; however, the combination of regulation + confidence + a run is the dangerous mix. Remember this underlying logic; knowing when to run is the most important.
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