Traders, Major Hedge Funds Short USDT As Uncertainty Around Stablecoins Rise

Numerous cryptocurrency trading hedge funds have opened major short positions on Tether USDT/USD.

What Happened: According to CoinDesk, digital currency broker Genesis stated that following Terra’s LUNA/USD downfall due to UST’s UST/USD de-peg, numerous short positions for Tether have opened. There has been extreme fear, uncertainty, and doubt injected into the market on the reliability of Tether.

The collateralized reserves supporting Tether have been questioned by investors globally. Furthermore, Tether was questioned for apparent commercial paper holdings and a rumoured affiliation with insolvent firm Celsius. Despite having dispelled false rumours by providing on-chain data about reserves, major cryptocurrency trading funds have opened short positions on Tether.

Why It’s Important: Major funds, including Fir Tree Partners and Viceroy Research LLC, have formerly shorted Tether. Following the de-peg of UST, there is extreme market angst surrounding stablecoins, such as Tether. Despite the same, Tether has publicly addressed hearsay regarding commercial paper holdings, their collateralized reserves, and the major scale deleveraging occurring.

A Tether official, with regard to short sellers in the stablecoin market, deemed it to be a "clever scheme to raise capital from those less knowledgeable, by leveraging on disinformation with the end goal of collecting a management fee."

As market uncertainties continue, Tether must protect its peg against short-sellers, market rumours, and major liquidations experienced across the sector.