Growing Short Selling: Stablecoin in Sight: Hedge Funds Betting Against Tether | News

The cryptocurrency market is still under pressure
Tether is the target of short sellers
Tether CTO is combat

There is still no peace in the cryptocurrency market. Cryptocurrencies have plummeted in the past few weeks. The reasons for this vary. On the one hand, the negative mood on the stock market is also transmitting to the world of cryptocurrencies, and on the other hand, the collapse of the algorithmic stablecoin Terra triggered a panic of sell-off on the volatile cryptocurrency market. In fact, the stablecoin should always be based on the value of the US dollar using a sophisticated system based on interaction with the second cryptocurrency LUNA. In May, however, there was a collapse: the link with the US dollar had to be abandoned, and many investors suffered a total loss.

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This is how Tether works

Against this backdrop, it is not surprising that another stable coin, Tether, is attracting investors’ attention. Because Tether USDT is also always pegged to the US dollar. However, this binding is not guaranteed by an algorithm as is the case with Terra. Here, Tether claims that each token is deposited with a dollar equivalent as a reserve so that USDT is always paid out. However, during the fall of Terra in May, Tether also suffered, such that the coin’s value fell to 95 cents at times. However, the cryptocurrency managed to stabilize again shortly after.

More hedge funds are betting on falling tether

Nevertheless, Tether is increasingly coming under the control of hedge funds that bet on the collapse of stablecoin. One is Genesis Global Trading, an institutional crypto broker, Leon Marshall, head of Genesis institutional sales, pleaded guilty to The Wall Street Journal. He said there would be “hundreds of millions” of dollars in close quarters against Tether: “There has been a tremendous increase in interest from traditional hedge funds that are looking at Tether and looking to cut it short,” Marshall told WSJ. Hedge funds from the US and Europe are of particular interest in this type of trade. On the other hand, crypto companies, especially those in Asia, would ensure that the transactions would take place.

This makes the hedge funds short

Marshall reveals that two reasons motivate hedge funds to become increasingly diminished attachments. On the one hand, the short sell-off is due to the generally negative sentiment in the markets. High inflation rates and rising key interest rates are pushing institutional investors increasingly out of risky assets to protect themselves from the current uncertainty. Second, there are hedge funds that question the quality of the assets Tether owns to back their stablecoin. Tether has always hidden what these reserves actually look like and where exactly they are. However, the company announced that it had commercial papers, bank deposits, precious metals, government bonds, and cryptocurrencies at its disposal. Last year, Tether already clashed with the New York City prosecution for reserves. Ultimately, the conflict ended in a settlement of $ 18.5 million, which Tether had to pay.

Tether CTO strikes back

Shortly after publishing a WSJ article on the hedge fund shorting on Tether, CTO Tether Paolo Ardoino tweeted.

In it, he expressed the assumption that hedge funds would try to spread further panic in the wake of the Terra crash in order to take advantage of falling prices. Ultimately, however, this strategy won’t work: “Ultimately, those hedge funds that have borrowed and shortened billions of dollars will have to buy them back. What will happen then? Tether is the only stablecoin that has proven itself in baptism under extreme pressure. ”

Editors of finanzen.net

Image sources: DIAMOND WIZUALIZACJE / Shutterstock.com, Wit Olszewski / Shutterstock.com

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