Hedge funds take short positions against Tether

2022 saw the downfall of many crypto projects. But Tether USDT is the project that is most expected to fail and remains. Traditional hedge funds believe it is a matter of time and are shorting stablecoin issuers.

Throughout 2022, several hedge funds bet against Tether. These include Fir Tree Capital Management, Viceroy Research, Valiant and more hedge funds are considering it.

Short positions against Tether rise

Bloomberg reported in March 2022 that Fir Tree, a hedge fund with $4 billion in assets under management, had taken a short position against Tether. At the time, the hedge fund even stated that it wished to create a separate fund to short Tether if there was sufficient interest from customers.

Additionally, Viceroy Research also bet on Tether failing. Viceroy is a short seller who previously bet against German company Wirecard AG before its collapse. According to founding partner, Fraser Perring insists that something is wrong with Tether. “We know our every good shortcoming, they’ve done something wrong.”

Valeant, a San Francisco-based short seller who previously traded in 2022, has now exited his position citing collateral risk.

Other short sellers appear skeptical about shorting Tether due to counterparty risk. Andrew Left, founder of Citroën Research, said, “I’m not short the tether – I haven’t got the vehicle. If somebody shows me a way to do it with Goldman Sachs as the counterparty, I’m up for it.”

Most traditional hedge funds shorting Tether used Genesis Global Trading as a counterparty. The parent company of Genesis, Digital Currency Group, is now facing liquidity issues.

In June 2022, Leon Marshall, head of institutional sales at Genesis, said:

“There has been a real uptick in interest from traditional hedge funds looking at Tether and looking to short it.”

Why hedge funds are shorting USDT

The decision of these traditional hedge funds to short Tether comes amid a lot of speculation about its financial health. The firm’s lack of transparency has given rise to rumors that it may have internal liquidity problems.

Everyone from on-chain sleuths to crypto executives have questioned Tether’s opaque finances. The regulators also fined him millions for misleading financial statements.

Meanwhile, the failure of algorithmic stablecoin Terra UST in May and the collapse of FTX in November have put further pressure on USDT, with many now viewing it as the next likely one to fail.

Tether Rejects Short Sellers View

But the firm has insisted it has no problem and will continue to honor the redemptions. Tether executives have described much of the speculation about its finances as a stress test.

Speaking against hedge funds betting, a spokesperson for the firm said they “engage in a clever scheme to raise capital from less knowledgeable people by taking advantage of misinformation with the ultimate goal of collecting management fees.”

However, given its position in the market, the failure of the stablecoin leader would be disastrous for the entire crypto sector. USDT is the largest stablecoin by market cap and the most used asset.


BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.

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