Sequel to the reports that Crypto focused hedge funds are taking short positions on the leading stablecoin in the cryptocurrency market, Tether’s USDT, Tether’s CTO, Paolo Ardoino, took to twitter to address concerns surrounding Tether and its backing.
Nairametrics previously reported that a Wall Street Journal (WSJ) report revealed that crypto-focused hedge funds are increasingly shorting the controversial U.S. dollar-pegged stablecoin, USDT, amid a bleak market outlook nearly a month after the implosion of terraUSD (UST).
What Ardoino Said
In a Twitter trend, Ardoino explained, “I have been open about the attempts from some hedge funds that were trying to cause further panic on the market after TERRA/LUNA collapse. It really seemed from the beginning a coordinated attack, with a new wave of FUD, troll armies, clowns etc. Tools: USDt/USD perps (the perfect attack vector that offers an asymmetric bet), spot short selling, DeFi pools unbalancing, … Goal: create enough pressure, in the billions, causing ton of outflows to harm Tether liquidity and eventually buy back tokens at much lower price.
“These hedge funds believed and helped all the FUD spread by the truthers in the past months / years: 1. they believe/d that Tether was/is not 100% backed. 2. they believe/d that Tether has/had exposure to Evergrande. 3. they believe/d that Tether has/had 85% exposure to Chinese CP. 4. they believe/d that Tether has/had issued tokens from thin air. 5. they believed that lenders were borrowing from Tether without over-collateralization. 6. they believed in all the narratives that some competitors were spreading via coordinated troll networks.”
He further stated, “Despite all the public 3rd party attestations, our collaboration with regulators, our increased transparency efforts, our commitment to phase out CP exposure and move into US Treasuries, our settlements, … they kept thinking and suggesting that we, Tether, are the bad guys. But as we always said, Tether had/has in fact >= 100% of the backing, never failed a redemption and all USDt are redeemed at 1$. In 48 hours, Tether processed 7B in redemptions, averaging 10% of our total assets, something almost impossible even for banking institutions.
“In more than one month Tether processed 16B in redemptions (~19% of our total reserves), again proving that our operations, portfolio, banking infrastructure and team are solid and battle tested. Tether also reduced its commercial paper exposure from ~45B to ~8.4B and is set to phase it out in full in the coming months. All the expiring CP have been rolled into US Treasury bills, and we’ll keep going till CP exposure will be 0. Tether portfolio is stronger than ever.
“And while the FUD was focusing on Tether, during the last 2 months of #crypto devastation, it was discovered that many lenders and hedge funds considered the holy heroes of our industry were actually taking risks that Tether never touched even with a ten-foot pole. Anyway, eventually these hedge funds, that borrowed and shorted billions of USDt will need to buy them back. What will happen then? Tether is the only stablecoin that is proven with fire under extreme pressure. Now… can other stablecoins survive the same test? Can money losing operations go on forever burning money simply because they have deep pocketed shareholders? Every non profitable company is always one round of financing away from bankruptcy.”
Ardoino concluded with a potato GIF stating, “And bankruptcy normally means MtGox eight years (and counting) waiting time for its creditors…..at least have a potato. They are rich in selenium.”
What You Should Know
The entire stablecoin market has taken a hit since UST’s implosion in May with investors redeeming huge amounts of USDT. In mid-June, investors pulled some $1.7 billion from Tether in a week alone.
Data from CoinGecko reveals that Tether’s market capitalization has fallen over $20 billion since mid-May.
In June, Tether said rumors of its portfolio being “85% backed by Chinese or Asian commercial paper” were “completely false” and likely perpetrated by those looking to generate “additional profits from an already stressed market.”
However, Tether has promised to have a full audit report released later this year.