Paolo Ardoino, the Tether chief technology officer has confirmed that the stablecoin has been the topic of a “coordinated attack” by hedge funds looking to short sell the dollar-pegged crypto asset. He alleged some hedge funds are trying to pressurize “in the billions” to “harm Tether liquidity” so that they can eventually buy back tokens at a much lower price.
On Monday, June 27, the Tether executive tweeted to respond to reports that hedge funds have been borrowing millions in loans to short USDT since the collapse of Terra (LUNA) in May.
The CTO imposed accusations that some hedge funds have believed and helped spread “FUD” (fear, uncertainty, and doubt) about the stablecoin.
Concepts that it is not 100% backed, is distributing tokens from “thin air,” has significant revelation to distressed companies and Chinese commercial paper have been spread by its competitors over “troll networks,” he claimed.
In a Tweet, refuting these rumors and slamming FUD spreaders, Ardoino said that the company has been collaborating with regulators and has increased transparency efforts, as well as noting its recent commitment to phase out its commercial paper exposure.
“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.”
He claimed that Tether has “never failed a redemption,” adding that in just the last 48 hours, Tether has converted around 10% of its total assets, which he said is “something almost impossible even for banking institutions.”
He also confirmed that Tether has already reduced its commercial paper exposure from $45 billion to $8.4 billion this month, aiming to clear out its commercial paper backing “in the coming months.”
Though, it appears Ardoino’s comments may not do much to hold back the tidal wave of short-sellers hoping to profit from a potential failure in the crypto’s price, which is currently sitting just below peg at $0.9989.
On Monday, Wall Street Journal quoted Leon Marshall, head of institutional sales at Genesis, stating that there has been an increase in trades to short Tether through its brokerage platform, mainly over the past month.
Marshall said, “There has been a real spike in the interest from traditional hedge funds who are taking a look at Tether and looking to short it”.
Short-selling is an exclusive investment strategy that allows an investor borrows assets and immediately sell them in the open market, intending to repurchase them later at a lower price to pocket the difference. It allows an investor to profit from the weakening of a share or asset.
Marshall added that in May the common short trades have come from traditional hedge funds in the United States and Europe, with many becoming interested following the fall of algorithmic stablecoin TerraUSD (UST).
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