Tether CTO says hedge funds tried to short USDT

Key points to remember

  • Tether CTO Paolo Ardoino said today that various cryptocurrency companies attempted to short his stablecoin.
  • Also today, Genesis Global Trading admitted that its hedge fund clients shorted Tether through its services.
  • Tether seems to have withstood the challenge: USDT is valued at $1.00, on par with the US dollar as expected.

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Paolo Ardoino, CTO of Tether, claimed today that hedge funds have attempted to short the USDT stablecoin.

CTO says funds failed to short

Ardoino wrote on June 27 that it is “open to… attempts by some hedge funds” to sell Tether (USDT).

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

Had these efforts been successful, Ardoino says, these hedge funds would have created billions of dollars of pressure before repurchasing USDT at a significantly lower price.

Having failed to destabilize Tether, Ardoino claims that these entities will have to buy back the Tether they borrowed at the fair value of the $1.00 coin or go bankrupt.

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 are facing insolvency for unrelated high-risk investment strategies.

Tether, on the other hand, managed to buy back $16 billion worth of USDT at full value in more than a month, Ardoino said.

Genesis says customers shorted tether

While reports of Tether shorting have emerged from various sources in recent months, the Wall Street Journal today published an explicit admission from a company.

Leon Marshall, head of institutional sales at Genesis Global Trading, says traditional hedge funds have shorted Tether through his brokerage. He said the trades involved involved “hundreds of millions” of dollars in value.

He added that hedge funds based in the United States and Europe generally look for opportunities to short Tether, while cryptocurrency companies in Asia arrange the other side of the transaction.

It is unclear why the companies chose to short the stablecoin. Marshall suggests that shorting Tether offers a way to bet against the broader economy and rising inflation. Additionally, Marshall says concerns over USDT support are encouraging investors to short the asset.

Tether, meanwhile, says these concerns are based on misinformation. Today, Ardoino denied rumors of insufficient support from Tether, exposure to Chinese commercial paper, and exposure to defaulting company Evergrande.

All these rumors have already been denied by Tether. Still, the uncertainty over the stablecoin, whether founded or not, has likely encouraged hedge funds to take risks.

Despite the ongoing controversy, USDT is currently priced at $1.00, at par with the US dollar as expected.

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

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