After the Collapse of UST, Crypto Hedge Funds and Traders Short Tether
- Since UST’s collapse in May, the stablecoin market has suffered as a result of investors selling off significant quantities of USDT. Investors reportedly withdrew $1.7 billion from Tether in only one week in mid-June, according to reports.
- The absence of audited reserves and the obscurity surrounding the asset’s true backing are two reasons why funds like Fir Tree Partners and Viceroy Research LLC have previously bet against Tether.
Some market participants believe that the recent implosion of crypto hedge fund United Satoshi’s Treasury (UST) may have been caused by a short squeeze in the tether (USDT) market. Since UST’s collapse in May, the stablecoin market has suffered as a result of significant USDT redemptions by investors. According to reports, investors withdrew almost $1.7 billion from Tether in only one week in the middle of June.
According to one trader, there are now a number of large traders and hedge funds who have short USDT, with positions worth hundreds of millions of dollars in notional value. This is likely to put significant downward pressure on the price of tether, as these traders attempt to exit their positions.
It remains to be seen whether this turn of events will lead to further weakness in the cryptocurrency markets, or if it will simply be chalked up as another example of the volatility and risk inherent in this young asset class.
It is becoming more and more common for crypto-focused hedge funds to short U.S. dollar-pegged stablecoins like Tether (USDT). This is due to the bleak market outlook that has emerged in the wake of the implosion of terraUSD (UST). According to WSJ, this trend was observed in a report published recently.
The report notes that some hedge fund managers have been taking advantage of the situation by shorting USDT, which they believe is overvalued. In addition, these managers are also bullish on cryptocurrency assets such as Bitcoin and Ethereum, which they believe will benefit from the current market conditions.
According to the issuer Tether Global, stablecoins like Tether are backed by fiat money and investments in comparable assets including “commercial paper,” bank deposits, bonds, gold, and cryptocurrencies.
Overall, it seems that hedge funds are increasingly bearish on USDT and bullish on cryptocurrencies. This could lead to more selling pressure on USDT and further upside for cryptocurrencies in the near future.
Barry Pene is a stern blockchain research/copywriter. Barry has been trading cryptos since 2017 and has been invested in issues that would put the blockchain industry on the right pedestal. Barry's research expertise cuts across blockchain as a disruptive technology, DeFis, NFTs, Web3, and reduction of energy consumption levels of cryptocurrency mining.
