Bitcoin Updates: Tether's Unstable Backing and Bitcoin's Rally Intensify Liquidity Shortage
- Bitcoin's price surge triggered Tether (USDT) outflows, raising liquidity risks as reserves face S&P downgrade. - NYDIG reports $3.55B ETF outflows in November, linked to corporate trades and algorithmic stablecoin losses. - S&P cites 5.6% Bitcoin exposure in USDT reserves, exceeding overcollateralization buffers, risking undercollateralization. - Analysts warn of self-reinforcing cycles as Bitcoin rallies coincide with Tether redemptions, straining liquidity. - Tether's 24% high-risk assets in reserves
The latest surge in Bitcoin prices has sparked significant outflows of
The vulnerability of Tether’s reserves has worsened after S&P Global Ratings downgraded USDT’s stability score to “weak,” its lowest rating. The downgrade was attributed to Tether’s rising allocation to riskier assets, with Bitcoin now making up 5.6% of USDT’s reserves—surpassing the 3.9% overcollateralization margin.
Despite USDT maintaining its lead in the stablecoin sector with $184.4 billion in circulation, the agency suggested that greater transparency and a reduction in risky asset exposure could help restore its rating. Nevertheless, the current trends mark a pivotal moment for the crypto industry, where tightening liquidity and increased regulatory oversight may challenge the market’s durability in the near future.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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