- Hedge funds are shorting Tether’s USDT with the trades running into hundreds of millions.
- Tether’s CTO thinks that the move is a “coordinated attack” but the stablecoin would still prove its mettle regardless.
- Tether has been subject to a number of controversies around the stablecoin’s reserve, leading to run-ins with regulatory agencies.
Hedge funds are betting millions of dollars against USDT in a massive short-selling spree. In the coming months, fortunes could swing either way but Tether’s CEO remains resolute that the firm would overcome the “new wave of trolls”.
Big money players lose faith in Tether
A Wall Street Journal report at the start of the week revealed that a number of hedge funds were shorting USDT with positions running into hundreds of millions. The money managers are probing for a crack in Tether’s dollar-backed stablecoin to score huge returns.
“There has been a real spike in the interest from traditional hedge funds who are taking a look at Tether and are looking to short it,” said Leon Marshal, a top-level exec at Genesis Global Trading Inc.
The hedge funds are motivated by TerraUSD’s de-pegging saga that led to the death of the Terra blockchain. The network’s implosion had a contagion effect with other stablecoins losing their pegs as the chaos spread through the sector. At the height of the market carnage, USDT briefly lost its peg and regained it to the relief of investors.
Paolo Ardoino, Tether’s Chief Technology Officer confirmed that he was aware of the moves by hedge funds to short USDT. He claimed that the players involved are only “trying to cause further panic on the market after Terra/Luna collapse.”
“It really seemed from the beginning a coordinated attack, with a new wave of FUD, troll armies, clowns, etc,” said Ardoino. He took a swipe at the hedge funds for always being in the middle of claims that the stablecoin is not 100% backed and that in time, their short positions will prove to be a wrong move.
“Tether is the only stablecoin that is proven with fire under extreme pressure,” Ardoino said in a brave response.
Tether has always had it rough
Controversy is never far away from Tether as the firm has had to grapple with multiple allegations that the stablecoin is not 100% backed. Things reached a crescendo when the firm was slammed with a $42 million fine by the Commodity Futures Trading Commission (CFTC) for “making misleading statements and omissions” over the holdings.
Tether has vehemently rebuffed the claims by stating that the stablecoin is fully backed by a combination of cash, foreign government bonds, US Treasury bills, commercial paper, and digital tokens.
As critics continue to look for cracks in the largest stablecoin, reports emerged that some of Tether’s reserves are being held in Capital Union, a small bank in the Bahamas. USDT has a market capitalization of $66.7 billion while its USD Coin (USDC) holds the record as the second-largest cryptocurrency exchange with a market cap of $55.83 billion.