S&P Downgrades Tether’s USDT to Weakest Rating Amid Industry Backlash: A Deep Dive into the “Tether FUD” Cycle
Introduction: The Unshakeable Giant Faces a Familiar Foe
On November 30, 2025, S&P Global delivered a significant blow to the world’s largest stablecoin issuer, slashing its rating for Tether’s USDT to a ‘5’—the weakest score on its stablecoin stability scale. This move, occurring during a quiet pre-Thanksgiving trading session, reignited the long-standing debate over the reserves backing the $10 billion-profit company. For years, the crypto industry has met concerns about Tether’s transparency with a two-word dismissal: "Tether FUD." Despite this persistent skepticism, USDT has not only survived but thrived, maintaining its dollar peg through extreme market cycles and the collapses of major industry figures like Sam Bankman-Fried and Alex Mashinsky. This article dissects the rationale behind S&P's downgrade, analyzes Tether's defiant response, and explores the broader industry reaction to this latest chapter in the ongoing scrutiny of the stablecoin behemoth.
The S&P Downgrade: Deconstructing the Rationale
S&P Global’s decision to downgrade USDT from a ‘4’ to a ‘5’ was rooted in a combination of historical concerns and a new, specific risk factor. The agency cited the "usual concerns about the opacity of Tether's reporting," a refrain familiar to anyone who has followed the stablecoin’s history. However, the report introduced a novel element to the critique: the composition of Tether’s reserves. S&P highlighted that bitcoin now comprises more than 5% of the assets backing USDT. The agency’s concern is that continued declines in BTC's price could potentially lead to undercollateralization of the stablecoin, meaning the value of its reserves might fall below the value of USDT in circulation.
This focus on bitcoin exposure marks a shift in the nature of the criticism. Previously, debates often centered on the quality and existence of reserves in general, including commercial paper and other instruments. By pinpointing BTC volatility as a direct threat to stability, S&P has framed the risk in terms of market dynamics that are easily understandable to both traditional and crypto finance participants. It is worth noting that this downgrade comes from an agency whose own ratings models were heavily criticized for their role in enabling the 2008 global financial crisis, a point not lost on industry observers.
Tether’s Counterattack: “We Wear Your Loathing With Pride”
Tether’s response to the downgrade was swift and characteristically combative. CEO Paolo Ardoino did not attempt to placate the ratings agency but instead launched a full-throated defense of his company’s model and a scathing attack on the traditional financial system. Shortly after S&P's move, Ardoino stated, "We wear your loathing with pride." He positioned Tether as a defiant challenger to a broken establishment, framing the downgrade as an attack from a "traditional finance propaganda machine" that grows worried "when any company tries to defy the force of gravity of the broken financial system."
Ardoino’s central claim was that Tether has built "the first overcapitalized company in the financial industry, with no toxic reserves." This narrative frames Tether not as a risky crypto outlier, but as a more robust and conservative entity than its traditional counterparts. By invoking past failures of ratings agency models, Ardoino sought to undermine the credibility of S&P’s assessment entirely, suggesting that Tether represents a new paradigm that old-world institutions fear. This response is consistent with Tether’s long-standing strategy of confronting critics head-on rather than conceding to their demands for transparency.
Industry Voices Weigh In: The Audit Debate Reignites
The S&P downgrade immediately sparked a broader conversation across social media and financial blogs, with prominent figures offering contrasting advice and criticism. Angel investor Jason Calacanis took to X to offer a three-point plan for Tether to "clean up." He urged the company to 1) sell all of its bitcoin, 2) own only U.S. treasuries, and 3) undergo not just one, but two audits by American firms.
This advice was met with swift backlash from the bitcoin community, which found the suggestion that a company deeply embedded in the crypto ecosystem should divest from Bitcoin paradoxical. Several respondents pointed to Calacanis's own actions during the March 2023 Silicon Valley Bank collapse, where he had requested a bailout for all bank deposits—a crisis exacerbated in part by a plunge in the value of the U.S. treasuries those banks were holding.
The call for an audit was later echoed by popular financial blogger Quoth the Raven, who has been a longtime gold bug but began coming around to bitcoin in 2024. He expressed deep skepticism about Tether’s refusal to undergo a full, independent audit. "I’ve been in this game long enough to know that when a company refuses to furnish a full, independent audit, it’s never because things are pristine and they just forgot to schedule one," he wrote. He argued that an audit is "the bare f---ing minimum anyone should demand from an entity issuing tens of billions in synthetic dollars that underpin entire markets," warning that "markets have a long, bloody track record of chewing up the naïve."
Contextualizing Tether’s Position: Profitability Versus Scrutiny
Amidst the controversy, it is crucial to consider Tether’s undeniable market position and financial performance. The company has become one of the globe's most profitable financial entities, earning "more than $10 billion through the first nine months of 2025," a figure that places it in a league with Wall Street titans Goldman Sachs and Morgan Stanley. Through soaring bull markets and brutal bear markets, USDT has continued to grow and function as designed—pegged to the U.S. dollar and available for redemption at any time.
This track record of operational success exists in stark contrast to the persistent cloud of skepticism. The company’s resilience has allowed it and its supporters to dismiss criticism as mere "FUD" (Fear, Uncertainty, and Doubt). The current bear market, however, appears to be providing fresh impetus for traditional finance institutions to sharpen their critiques. The central paradox remains: Tether is simultaneously one of the most profitable and most distrusted companies in the digital asset space.
A Broader Market Perspective: Gold vs. Bitcoin in 2025
The debate over Tether’s bitcoin holdings occurs against a macroeconomic backdrop where traditional safe-haven assets are outperforming crypto. As noted in recent analysis titled "Why Gold Is Winning Over Bitcoin in 2025: Liquidity, Trade, and Trust," gold has significantly outperformed bitcoin since the launch of spot BTC ETFs, rising 58% as bitcoin fell 12%. Analyst Mark Connors suggested that bitcoin remains “too young” for institutional trust, while gold continues to benefit from established infrastructure and trade use.
This context is critical for understanding S&P's concern regarding Tether’s BTC exposure. In an environment where gold is winning and bitcoin is facing a global liquidity squeeze—with Connors pointing to U.S. Treasury spending delays as a key factor—holding a volatile asset like bitcoin as part of a stablecoin's reserve becomes an even more contentious point. It underscores the divergence between crypto-native confidence in Bitcoin and traditional finance's preference for time-tested assets.
Conclusion: A Clash of Philosophies with Billions at Stake
The S&P downgrade of Tether’s USDT is more than a simple ratings change; it is the latest salvo in a fundamental clash between traditional financial oversight and the decentralized ethos of cryptocurrency. On one side stands S&P Global, applying its traditional framework to highlight risks from reserve opacity and Bitcoin volatility. On the other stands Tether, boasting immense profitability and operational resilience while rejecting the very premises of its critics.
For market participants, this event reinforces several key dynamics. The demand for a transparent, independent audit remains the single biggest point of contention that Tether has yet to resolve to its critics' satisfaction. Furthermore, the composition of stablecoin reserves will continue to be a focal point of scrutiny, especially in bear markets when asset volatility is heightened.
Readers should watch for two developments going forward: any material change in Tether’s reserve composition, particularly its Bitcoin holdings, and any movement toward or away from securing the full independent audit that critics demand. The endurance of the "Tether FUD" cycle demonstrates that until these core issues are addressed to the market's broad satisfaction, the world's most dominant stablecoin will continue to operate under a cloud of skepticism, even as it continues to power vast swathes of the crypto economy.