Hedge Funds are Shorting Tether After Terra Implosion

The Wall Street Journal released a report on Monday (June 27th, 2022) stating that hedge funds are ramping up efforts to short Tether (USDT), the stablecoin pegged to the U.S. dollar. Subsequently, Tether Chief Technology Officer (CTO), Paolo Ardoino, voiced his thoughts on Twitter in a 12-part thread.

He discussed some of the strategies being used to short the stablecoin, which include: 

• USDT/USD perps 
• spot short selling
• DeFi pools unbalancing

Ardoino claims these are all attempts to negatively impact Tether’s liquidity and later buy USDT tokens back for a much lower price. He goes on to discuss the part that hedge funds have played in spreading misinformation such as Tether not being 100% backed. The thread continues with several ways that hedge funds have tried to discredit Tether in the past. 

The Twitter post goes on to defend Tether by refuting the alleged misinformation. This included Ardoino stating that the coin has always been 100% backed, that it has never failed on the redemption forefront, and that all USDT funds are redeemed at $1 USD.

He also alleges that the same hedge funds who are participating in these short positions are the same ones that were taking major risks during the last few months. Ardoino claims that “the holy heroes of our industry were actually taking risks that Tether never touched even with a ten-foot pole.” 

The role of Genesis Global Trading

The unnamed hedge funds are said to be utilizing Genesis Global Trading in order to run these short bets. Genesis Global has 48% of its assets tied to USD or stablecoins with a current $14.6 billion in active loans.