More and More Hedge Funds Have Been Shorting Tether’s USDT Stablecoin Amid Market Meltdown
Short sellers, especially hedge funds, have been building up their short selling position on Tether’s USDT stablecoin as the crypto market meltdown continues. The recent short selling happens as some of the crypto lending firms have been facing severe liquidity challenges and insolvency issues.
A report from the Wall Street Journal shows that traditional hedge funds have been shorting Tether’s USDT stablecoin through Genesis Global Trading Inc. Leon Marshall, Genesis’s head of institutional sales said that these trades are worth “hundreds of millions” of dollars in notional value.
Marshall further added: “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”. Tether is currently the world’s largest stablecoin with a market cap of $67 billion pegged to multiple fiat currencies such as USD, GBP, etc.
Genesis said that most of the short trades for USDT have been coming from traditional hedge funds in the U.S. and Europe. Furthermore, the hedge funds got increasingly interested in shorting Tether (USDT) after the collapse of the TerraUSD (UST) stablecoin.
As per the WSJ report, there are two main reasons behind hedge funds shorting Tether (USDT). The first is the rising uncertainty in global macros and thus, some hedge funds are shorting Tether as a bet against the broader economy.
On the other hand, hedge funds continue to express concerns over the quality of reserve assets held by Tether. Tether said that it has sufficient and equivalent USDT reserves in the form of commercial paper—or corporate short term loans. Besides, it also holds “bank deposits, precious metals, government bonds and digital tokens” as reserves for the USDT.
However, hedge funds justify their short positions saying that Tether’s 85% commercial papers are backed by debt-ridden Chinese properties. Tether has called these rumours as “completely false”.
Tether CTO Paolo Ardoino called this a coordinated attack on USDT with a new wave of FUD, troll armies, clowns etc. Lashing out further Ardoino added: “Despite all the public 3rd party attestations, our collaboration with regulators, our increased transparency efforts, our commitment to phase out CP exposure and move into US Treasuries, our settlements, ... they kept thinking and suggesting that we, Tether, are the bad guys”.
Ardoino added that Tether has 100% backing for its USDT and they have never failed redemptions even during these tough market conditions. Furthermore, he added that Tether has been working to reduce its commercial paper exposure and is working to phase it out completely in the coming months.
The Tether CTO added: “Eventually these hedge funds, that borrowed and shorted billions of USDt will need to buy them back. Tether is the only stablecoin that is proven with fire under extreme pressure”.