Hedge funds are targeting the crypto ecosystem as it struggles to recover from the effects of Tether’s collapse. Tether is the stablecoin USDT. This was confirmed by Paolo Ardoino via Twitter, who is the CTO of Tether and Bitfinex.
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Rumours claim that hedge funds opened short positions on USDT (Tether) and actively sought to cause panic in crypto to impact the stablecoin. They might want to repeat the events which led to the crash of LUNA or UST, and they could do so by peg 1 to USDT.
These digital assets were central to Terra ecosystem. They functioned like an algorithmic stablecoin based on the U.S. dollar until its crash, which lost over 90%. AccordingHedge funds could profit from a USDT crash similar to the one experienced by Ardoino.
I’ve been transparent about some attempts made by hedge funds to further panic the market, following the TERRA/LUNA fall. From the very beginning, it seemed like a coordinated attack with new waves of FUD and troll armies as well as clowns.
The outcome would be different, as Tether’s CTO explained, these hedge funds would allegedly try to trigger a massive capital outflow from the stablecoin and destabilize its price. Ultimately, if the price of USDT drops, the short players would “buy back tokens at a much lower price”.
Ardoino claimed that the entities have been spreading Fear, Uncertainty, and Doubt about the stablecoin, like the rumors that Tether wasn’t 100% backed in real assets and was subject to failed investments. Tether’s Chief Technology Officer denied again the allegations.
Tether had/has in fact >= 100% of the backing, never failed a redemption and all USDt are redeemed at 1$. Tether has processed 7B redemptions in 48 hours, which is 10% on average of all our assets. This feat was almost unimaginable even for banks.
Does Tether have to Follow LUNA/UST?
In that sense, Ardoino put into question the “billions” in short positions taken by these hedge funds. The executive claims USDT is a battle-tested stablecoin that has outlasted several crypto bear markets, and even companies considered “the holy heroes of our industry”.
As Bitcoin and the crypto market trend to the downside, Tether’s (USDT) total market capitalization saw an almost 20% drop. However, the stablecoin operates with a very different mechanism than that of Terra’s LUNA-UST and seems unlikely to follow the same path.
Although USDT is controversial in space, it has been around for nearly a decade. Stablecoin’s creator has worked to improve its relationships with the government, transparency and add more assets that can back USDT.
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As a pseudonym analyst said on Twitter, this doesn’t mean the stablecoin could never fail, but it does seem to suggest the “FUD on USDT seems overrated”.
According to USDT issuance, most Tether clients are known market players and trading companies such as @AlamedaResearch, @CumberlandSays, @jump_, etc.
89.5% total USDT issuance went to Big CEX market makers such as Binance and FTX. OKX. Bitfinex. pic.twitter.com/qQ4DHAIfuF
— alphanonce Intern (@alphanonceStaff) June 22, 2022