Hedge funds that decided to open a short position in USDT after the Terra collapse, ‘on a fundamental level do not understand the principles of how the cryptocurrency market and Tether operate,’ the issuer of the stablecoin said.
Why Hedge Funds are Losing Money Shorting USD₮ https://t.co/Q0RaLJGP7W
— Tether (@Tether_to) July 28, 2022
Tether Limited responded to the WSJ podcast, in which concerns about the backing of USDT and the grounds for its shorting were discussed.
The publication first reported the popularity of such an idea in June. At that time the company’s CTO Paolo Ardoino said the firm had processed the fiat conversion of 7 billion tokens (~10% of total assets).
On June 18, the issuer’s stablecoin site came under a major DDoS attack. Then the CTO of the issuer ruled out any impact of the incident on the ability to redeem USDT positions.
The hedge funds’ consideration of the Terra collapse as a constructive factor for a short position on Tether represents an asymmetric knowledge gap between participants in the cryptocurrency markets and traditional financial institutions, the issuer’s representatives wrote.
Among other ‘unfounded reasons’ for such actions the company named:
- issuance of USDT ‘out of thin air’;
- significant holdings in the commercial paper of Chinese companies, including the problematic Evergrande developer;
- ‘providing unsecured loans’ to third parties;
- distrust of the thesis that issued stablecoins are 100% backed and highly liquid.
Earlier in May, USDT deviated from the dollar peg, testing the $0.94 level, but later returned to parity.
Earlier, Tether pledged to eliminate the share of commercial paper in its reserves no later than November. A year ago their volume was valued at $30.8 billion, compared with the current $3.7 billion, according to Ardoino.
For more on how Tether works, read our educational cards.
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