Bitcoin’s Price is Falling. Is Tether to Blame? The Unsettling Truth Behind the Drop

Bitcoin's latest dip has traders pointing fingers—and one name keeps surfacing: Tether.

The stablecoin giant faces renewed scrutiny as Bitcoin wobbles. Market watchers whisper about potential sell pressure from USDT redemptions, while skeptics question whether this is just another chapter in crypto's favorite blame game.

Tether's Shadow Looms Large

Every Bitcoin correction needs a villain. This time, the narrative centers on Tether's reserves and its potential market impact. Does massive USDT minting artificially inflate prices? Could redemptions trigger cascading sell-offs? The theories are as persistent as market volatility itself.

Regulators Circle as Prices Churn

While traders hunt for causes, regulators sharpen their pencils. The stablecoin scrutiny intensifies with each market tremor—because nothing attracts oversight like billions moving during a downturn. Traditional finance veterans smirk from the sidelines, muttering about 'digital tulips' and leverage they warned about years ago.

The Real Story Behind the Blame Game

Here's the uncomfortable truth: markets fall for countless reasons. Over-leverage, macroeconomic shifts, and pure sentiment often matter more than any single entity. Blaming Tether offers simple causality in a complex system—a comforting story when portfolios bleed red.

Bitcoin survives narratives. It's weathered exchange collapses, regulatory crackdowns, and endless 'this time it's different' prophecies. The current dip might be Tether's fault, or China's, or the Fed's—or just markets being markets. One thing's certain: the crypto blame game remains more stable than the assets it describes.

It’s often difficult to pinpoint the exact reason behind a sudden pullback like this — but there’s one factor worth mentioning here: the health of Tether.

The market-leading stablecoin issuer was recently the subject of a new report by S&P Global, which assessed the stability of its flagship asset USDT.

And in a worrying development, analysts have downgraded its ability to maintain a 1:1 peg with the US dollar from “constrained” to “weak,” its lowest rating.

Two primary reasons were given. The first surrounds ongoing concerns that Tether “provides limited information” about how the stablecoins in circulation are backed. Meanwhile, S&P Global has also sounded the alarm over the higher-risk assets that can be found within the company’s reserves.

“These assets include Bitcoin, gold, secured loans, corporate bonds, and other investments, all with limited disclosures and subject to credit, market, interest-rate, and foreign-exchange risks. Bitcoin now represents about 5.6% of USDT in circulation, exceeding the 3.9% overcollateralization margin, indicating the reserve can no longer fully absorb a decline in its value.”

According to S&P analysts, further drops in Bitcoin’s price could leave USDT undercollateralized — and create big problems in the event of mass redemptions. However, the report went on to stress that Tether could regain a higher rating if it moves to offload some of the riskier assets in its portfolio.

Questions also linger about Tether’s plans to diversify into other businesses that span divisions including finance, data, power and education. The report warned it’s difficult to verify whether these ventures are fully segregated from its Core stablecoin operation, and makes it riskier than rivals such as Circle.

Despite the harsh scoring, S&P Global does note that Tether generally has a “good track record of stability” — and experienced only “minor fluctuations” during acute moments of distress in the crypto market, such as the devastating collapses of Terra and FTX back in 2022.

However, analysts predicted that the stablecoin issuer’s undisputed position as market leader could begin to diminish.

“The rise of other stablecoins with enhanced regulatory credentials and increasing adoption could introduce competitive pressures over time, as reflected by the decline in Tether’s market capitalization relative to USDC falling from 3.5x to 2.4x over the past year.”

Tether often reacts violently to criticism surrounding its business model, and its response to S&P Global has been no exception. The company’s CEO, Paolo Ardoino, wrote on X: “We wear your loathing with pride.”

“The traditional finance propaganda machine is growing worried when any company tries to defy the force of gravity of the broken financial system … Tether instead built the first overcapitalized company in the financial industry, with no toxic reserves. And yet is and remains extremely profitable. Tether is living proof that the traditional financial system is so broken that it’s becoming feared by the emperors with no clothes.”

There’s no disputing that Tether is profitable, but record-breaking returns may not last forever as the Federal Reserve continues to cut interest rates.

However, it’s worth noting that Ardoino’s statement didn’t actually attempt to address or refute any of the concerns that the S&P raised in its report.

Overall, bitcoin concluded the past month down 17.67% — officially its worst November performance for seven years.

As Cryptonews recently noted, every single November decline since 2013 has been followed by another loss in December. This could prove bad news for bulls who are desperate to reclaim some momentum, and end 2025 at a higher price than where it started in January.

Over the coming week, chatter surrounding whether the Federal Reserve will cut interest rates — and ongoing concerns over the profitability of AI firms — could determine BTC’s path in the short term.

Bitcoin’s price is now 32% below the all-time high of £126,198 set less than two months ago, with $80,000 a vital price to stay above to prevent further declines.