Tether CTO Calls Out Hedge Funds Shorting USDT

Tether’s CTO has responded to reports that claimed that hedge funds have short bets on the USDT stablecoin. 

WSJ Reports Shorting Bets

On June 27, The Wall Street Journal reported that hedge funds have been shorting bets on Tether’s USDT stablecoin through the crypto brokerage firm Genesis Global Trading. In response, Tether’s CTO, Paolo Ardoino, tried to disprove the strategy via a detailed Twitter thread. He explained that the hedge funds tried to exploit perpetual contracts by short-selling on spot markets and creating imbalances in DeFi pools. The idea was to build up pressure that would force the outflow of the stablecoin and destroy Tether’s liquidity. The hedge funds would have then repurchased USDT at a much lower price. 

Tether CTO Refutes Shorting Strategy

Ardoino states that the plan was unsuccessful, and Tether retained its $1 peg, even after processing “7B in redemptions” in 48 hours. Therefore, the entities who tried to destabilize Tether would now have to buy back the coin at its $1 price point or file for bankruptcy. Ardoino’s arguments have a point, as the threat of insolvency looming over other lenders and hedge funds like Celsius and Three Arrows Capital has so far not affected Tether. The company has stayed away from high-risk investment strategies, for which it was able to successfully redeem $16 billion of USDT at full value in more than one month. 

He tweeted, 

“Tether also reduced its commercial paper exposure from ~45B to ~8.4B and is set to phase it out in full in the coming months. All the expiring CP have been rolled into US Treasury bills, and we’ll keep going till CP exposure will be 0. Tether portfolio is stronger than ever.”

In fact, the Tether team had taken precautionary measures, like bolstering its stablecoin reserves, to prevent going down the Terra route. 

Genesis’s Role

The WSJ report also quoted Genesis’s head of institutional sales, Leon Marshall, who admitted, 

“There has been a real spike in the interest from traditional hedge funds who are taking a look at tether and looking to short it.”

The firm has also affirmed that the short positions have shot up since the devastating market crash of the UST stablecoin. Algorithmic stablecoins have suffered a drop since then, which had a domino effect on major crypto lenders and hedge funds. The report pointed out that while some funds are shorting USDT to counter the rising interest rates of inflation, others are questioning the quality of assets backing Tether. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.