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Tether CTO Confirms Hedge Funds Tried To Short USDT

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Key Findings

  • Tether CTO Paolo Ardoino said today that various crypto firms have been trying to sell his stablecoin.
  • Also today, Genesis Global Trading admitted that its hedge fund clients have shorted Tether through its services.
  • Tether seems to have stood the test, with USDT valued at $1, as expected, on par with the US dollar.

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Paolo Ardoino, CTO of Tether, confirmed today that hedge funds have been trying to sell the USDT stablecoin.

CTO says funds failed to short Tether

Arduino wrote On June 27th, he is “open about… attempts by some hedge funds” to short Tether (USDT).

He explained that these hedge funds were trying to achieve their goal by using perpetual contracts, short selling in spot markets, and creating imbalances in DeFi pools.

If these efforts were successful, these hedge funds would have created billions of dollars of pressure before buying back USDT at a significantly lower price, Ardoino said.

Having failed to destabilize Tether, Ardoino says these entities will have to buy back the Tether they have borrowed for the proper value of the $1 coin or face bankruptcy.

Ardoino argued that this month’s liquidity crunch shows lenders and hedge funds “taking risks that Tether has never touched even with a ten-foot pole.” Although Ardoino did not name any companies, Celsius and Three Arrows Capital faced insolvency due to unrelated high-risk investment strategies.

By contrast, Tether successfully bought back $16 billion at full price in more than one month, according to Ardoino.

Genesis says customers have short-circuited Tether

While reports of Tether shorts have surfaced in recent months from various sources, the Wall Street Journal today published a candid admission from one firm.

Leon Marshall, head of institutional sales at Genesis Global Trading, claims that traditional hedge funds have been shorting Tether through his brokerage. He said the related deals involved “hundreds of millions” of dollars.

He added that hedge funds based in the US and Europe typically look for opportunities to short Tether, while crypto firms in Asia arrange the other side of the deal.

It is not clear why firms chose to short the stablecoin. Marshall suggests that shorting Tether provides an opportunity to bet against the broader economy and rising inflation. In addition, Marshall says that concerns about USDT support are prompting investors to short the asset.

Meanwhile, Tether says these concerns are based on misinformation. Today, Ardoino denied rumors about Tether’s lack of support, the impact on Chinese commercial paper, and the bankruptcy of firm Evergrande.

All of these rumors have previously been debunked by Tether. However, the uncertainty about the stablecoin, justified or not, has likely spurred hedge funds to take the risk.

Despite ongoing controversy, USDT is currently valued at $1, which is at parity with the US dollar, as intended.

Disclosure: At the time of this writing, the author owned BTC, ETH, and other cryptocurrencies.

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