According to a WSJ article on Monday, June 27, short sellers increased their short positions on the world's largest stablecoin, Tether (quotation USDT). Against a backdrop of bleak market outlooks and an implosion of the stablecoin TerraUSD (UST), cryptocurrency hedge funds are increasingly shorting USDT.
Tether's USDT is the largest stablecoin in the world, with a market cap of $ 67 billion. The USDT stablecoin has its value pegged to several fiat currencies, the most recent of which is the British pound.
Over the past month, traditional hedge funds have been shorting USDT via cryptocurrency broker Genesis Global Trading Inc. Leon Marshall, head of institutional sales at Genesis, said these trades were worth “hundreds of millions "Dollars. Marshall added: "There has been a real spike in interest from traditional hedge funds who are looking at Tether and trying to put it up for sale."
Genesis also added that much of the USDT short trades come from traditional hedge funds based in the US and Europe. On the other hand, Asian cryptocurrency companies have facilitated the other side of the trade.
Tether's short USDT positions increased following the collapse of the stablecoin TerraUSD in May. After the collapse of Terra, the USDT stablecoin also lost its peg, briefly dropping to 95 cents. It has since recovered and is now quite close to $ 1.
Why are hedge funds shorting Tether's USDT stablecoin?
According to the WSJ report, there are two reasons. The first is that hedge funds are shorting USDT by betting against the economy at large. Inflation at its 40-year high and the Fed's hike in interest rates are driving investors away from riskier assets like cryptocurrencies.
Other hedge funds have expressed concerns about the quality of the assets supporting Tether. However, Tether said it holds an equivalent amount of reserves in the form of short-term corporate loans and commercial paper. It also has reserves in the form of precious metals, government bonds, bank deposits, and digital tokens.
Some short sellers argue that the commercial papers held by Tether were backed by indebted Chinese real estate developers. However, Tether denied these rumors by calling them "completely false".
Tether's CTO takes it out
When news broke on Monday that hedge funds shorted Tether (USDT), Tether CTO Paolo Ardoino gave a detailed explanation. He called it a "coordinated attack" by hedge funds and "a new wave of FUDs, armies of trolls, clowns, etc.".
Ardoino pointed out that Tether has a 100% reserve for its USDT and has never failed in redemptions. In more than a month, Tether managed $ 16 billion in redemptions, or 19 percent of its total reserves. Tether's CTO Ardoino said:
Despite all public claims from third parties, our partnership with regulators, our increased transparency efforts, our commitment to phase out exposure to CPs and move to US Treasuries, our settlements, ... continued to think and to suggest that we, Tether, are the bad guys ".
Tether has also reduced its commercial paper exposure from approximately 45 billion to approximately 8,4 billion and is preparing to eliminate it completely in the coming months. All maturing CPs have been converted to US Treasuries and we will continue until CP exposure is zero.
The Tether wallet is stronger than ever. Tether is the only stablecoin that has been shown to withstand extreme pressures.
