Concerns that Tether is not being upfront about the reserves backing its USDT stablecoin, or that it faces an imminent threat of running out of capital, are so old and vitriolic that the crypto industry has devised its own two-word negative response: “Tether FUD.”
Through soaring bull markets, the most brutal bear markets, and the comings and goings of Sam Bankman Freed, Alex Mashinsky, and dozens of other charlatans, Tether’s USDT has continued to grow and function as designed – pegged to the US dollar and redeemable at any time. On top of that, Tether has become one of the world’s most profitable companies, earning more than $10 billion in the first nine months of 2025, putting it on par with Wall Street giants Goldman Sachs and Morgan Stanley.
But in the current bear market (don’t call it “zooming out” because it’s a bear market), some in traditional finance are sharpening their claws again.
During a sleepy session the day before Americans celebrated Thanksgiving, S&P Global downgraded Tether’s USDT from 4 to 5, making it the weakest level on the stablecoin stability scale (yes, the agency whose ratings shenanigans helped enable the global financial crisis has a stablecoin stability scale).
The reason for the downgrade was a combination of the usual concerns about Tether’s reporting opacity and something a little new. Bitcoin currently has compromised over 5% of the reserves backing USDT, so a continued decline in BTC prices could lead to a potential collateral shortage.
There’s smoke. Is there some sort of fire?
“We take your hate with pride,” Tether CEO Paolo Ardoino said shortly after the S&P move. Mindful of the repeated failures of the rating agency model, Ardoino said, “Traditional financial propaganda machines grow increasingly nervous about companies attempting to defy the gravity of a failed financial system…Instead, Tether has created the financial industry’s first overcapitalized company with no toxic reserves.”
Tether, he concluded, is “living proof that the traditional financial system is so broken that it has become feared by naked emperors.”
Perhaps trying to be helpful, or perhaps just to stir up some flame, prominent angel investor Jason Calacanis asked X for advice over the weekend.
“Tether still has a lot of work to do, but it’s getting closer,” Karacanis said. He urged Tether to 1) sell all its Bitcoin holdings, 2) own only U.S. government bonds, and 3) undergo not just one but two audits by U.S. companies.
Calacanis’ post sparked a swift and furious reaction from Bitcoiners, with the common reaction being that it was absurd for a stablecoin/Bitcoin company to exchange relatively small BTC holdings for government paper. Several people have noted that Mr. Karacanis hastily called for a bailout of all bank deposits, in part because Silicon Valley Bank collapsed in March 2023 and the value of its U.S. Treasury holdings plummeted.
fair enough. But even if Tether holds the Bitcoin, what about a traditional audit? Karacanis was later joined on this topic by popular financial blogger Quos the Raven. He is a long-time gold expert who became interested in Bitcoin in 2024.
“I’ve been in this industry long enough to know that when a company refuses to provide a full, independent audit, it’s never because things are clean and they simply forget to schedule an audit,” QTR wrote. “I’ve only ever found one reason why a company would fall behind and not respond to an audit when everyone asks for one. And that’s not a good reason.”
He continued: “The market has a long and bloody track record of preying on the naive.” “[An audit]is the bare minimum anyone should demand from a company that issues tens of billions of synthetic dollars that support entire markets.”
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