Tether, the issuer of Tether (USDT), says that hedge funds that tried to short its stablecoin after the Terra crash in May are using a thesis that is “incredibly misinformed” and “dead wrong”.
In a blog post on Thursday, Tether pointed to a June 28 Wall Street Journal podcast in which the host Luke Vargas and guest Caitlin McCabe discussed the bearish crypto market and concerns about Tether’s backing assets as reasons for short sellers’ appetite for Tether.
Tether said that hedge funds, who saw the collapse of Terra as a reason to short USDT, have “a fundamental misunderstanding of both the cryptocurrency market and Tether”:
“The simple fact that hedge funds view the collapse of Terra as a constructive thesis to go short USDT represents the asymmetric knowledge gap between cryptocurrency market participants and entities in the traditional financial space.”
In early May, TerraUSD Classic (USTC) lost its peg in dramatic fashion and dropped the price of the native Terra ecosystem token (LUNA) – now known as Luna Classic (LUNC) – to fractions of a cent. when previously it was over $60.
At that time, Tether saw a 21% drop in its market cap since May 11, from $85.3 billion, although it remains the largest stablecoin in the cryptocurrency market today, with a market cap of $65.8 billion.according to CoinGecko.
In late June, Tether’s chief technology officer, Paolo Ardoino confirmed that USDT had been the subject of a “coordinated attack” by hedge funds looking to short sell the crypto asset..
He alleged that hedge funds have been trying to create “billions” of pressure to “hurt Tether’s liquidity” with the goal of eventually buying tokens back at a much lower price..
Tether, in its most recent blog post, noted that various misconceptions about its holdings have been the basis for this short-selling move.including that Tether owns significant Chinese commercial paper or Evergrande debt, that USDT is created “out of thin air”, or that Tether has issued unsecured loans:
“In short, the underlying thesis of this trade is incredibly ill-informed and dead wrong. Furthermore, it rests on a blind belief in what borders on outright conspiracy theories about Tether.”
In a separate post the day before, Tether attempted to reaffirm the strength of its financial backing and ability to meet redemptions, reiterating that it has no Chinese commercial paper and had reduced its total commercial paper holdings by 88% from $30 billion to $3.7 billion over the course of the year. last year.
He added that commercial paper holdings would be reduced to USD 300 million at the end of August, and that he will have no commercial paper at the beginning of November..
The week the UST fiasco began, USDT briefly tumbled on the open market to as low as around $0.96 as investors dumped the tokens either into fiat via direct redemptions or into other tokens, such as its competitor USD Coin (USDC). However, Tether continued to accept refunds of $1 per token during that period.
Its latest financial statement on March 31 revealed that 85.64% of Tether’s financial backing is in cash and cash equivalents, including commercial paper..
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