Tether’s profit for the second quarter came in strong, with net operating earnings around $1.5 billion, helped by Treasury holdings and repo operations. But excess reserves, a key cushion against stress, fell sharply, dropping to $4.11 billion at quarter-end from the prior record of $8.23 billion. That decline matters because the excess reserve is what’s left over after covering all Tether tokens in circulation. It’s the first line of defense if part of Tether’s assets take losses or redemptions spike. So even robust profits don’t substitute for a narrowing buffer when investors assess the stability of one-for-one redemptions.
Tether is still the single largest stablecoin in a market the BIS puts at over $320 billion in capitalization. The main watchpoint now is whether future reserve updates show that cushion stabilizing after this quarter’s drop. If the buffer keeps shrinking, confidence in systemic resilience would have a narrower margin.
Tether’s lower excess reserves may matter more than its headline profit if markets get choppy next.