A stark warning from a top European asset manager claims Tether and Circle, the two largest stablecoin issuers, are vulnerable to a liquidity crisis that could see their tokens de-peg by as much as 13 percent, challenging their status as safe-havens for cash settlement.
"To be honest, a stablecoin, from my perspective, is not a stablecoin,” Christoph Hock, head of Tokenization and Digital Assets at Union Investment, said at the Digital Money Summit 2026 in London. “When looking at the invested assets, for example, of Tether, they have massive holdings in gold, they have massive holdings in bitcoin.”
Hock, whose firm manages nearly $620 billion in assets, argued that the reserve composition of both Tether’s USDT and Circle’s USDC makes them behave more like speculative hedge funds. He pointed to a March 2024 incident where USDC’s price fell to $0.74 and a more severe de-pegging a year earlier when it plunged 13% to 87 cents. For institutional players using stablecoins for overnight cash settlement, Hock said, a sudden 13% mark-to-market loss is “catastrophic.”
The core issue, according to Hock, is that the inclusion of volatile assets like gold and bitcoin in reserves shifts unacceptable market risk onto corporate treasuries and asset managers who rely on stablecoins as a fiat-pegged digital dollar. This fundamental instability, he argues, undermines their entire premise as a low-risk instrument for institutional finance.
Altcoin Market Already Under Pressure
The warning about stablecoin stability lands at a precarious time for the broader crypto market. A recent JPMorgan report noted that ether (ETH) and other altcoins are already in a multi-year trend of underperforming bitcoin. The bank’s analysts, led by Nikolaos Panigirtzoglou, said weak network activity, sluggish growth in decentralized finance (DeFi), and a lack of real-world adoption have weighed on investor demand.
Spot ether ETFs have recovered only about one-third of their prior outflows, compared to a two-thirds recovery for bitcoin ETFs, illustrating the divergence in investor confidence. Repeated hacks and security breaches have further eroded trust and drained liquidity from altcoin ecosystems. A crisis in the primary stablecoins used for trading and liquidity in these markets could significantly worsen these existing pressures.
Demand for 24/7 Trading Highlights Stakes
Despite the structural risks, the demand for the core utility that stablecoins provide—around-the-clock market access—continues to grow. The strong performance of new exchange-traded funds (ETFs) tied to trading platforms like Hyperliquid, which allows 24/7 trading of crypto, oil, and precious metals, shows the appetite for always-on financial infrastructure.
Eli Ndinga, global head of research at 21Shares, noted that traders flocked to Hyperliquid during recent geopolitical tensions after traditional markets had closed, with silver trading on the platform at one point representing 2 percent of CME silver volume. This underscores the critical role that stablecoins play as the settlement layer for this new financial ecosystem. However, it also raises the stakes, as any instability in USDT or USDC could freeze liquidity across these burgeoning 24/7 markets, triggering cascading failures. The conflict between the market's demand for constant liquidity and the questionable stability of the assets providing it remains the central, unresolved risk in the digital asset space.
This article is for informational purposes only and does not constitute investment advice.
