Open Exodus Blog - Stabelcoins
29 June 2022 Open Exodus

Stablecoins Targeted by Hedge Funds

Ardoino, the CTO of the stablecoin cryptocurrency Tether, (USDT), recently explained in a Twiiter thread attempts by major hedge funds to coordinate a short selling attack on Tether.

This comes nearly a month after the collapse of the algorithmic stablecoin TerraUSD(UST). Short-selling is a common investment tool; an investor borrows assets such as USDT (whilst staking another asset as collateral) and then immediately sells them. The expectation being that by the time the investor has to return the borrowed asset, it would have dropped in price, enabling them to profit the difference.

One Tether is always redeemable for $1 USD, with the amount of Tether in circulation being matched by the appropriate amount of dollars / debt / bonds etc held by Tether. Doubts of these holdings, as with Terra, can cause holders to lose confidence and create an enourmous amount of selling pressure, which then triggers the short positiions and it's a rapid fall to $0 from there.

Ardoino in his Twitter thread explained that there is no reason for such FUD and Tether, as it always has been, will always be redeemable for 1 $USD. The cryptocurrency market sincerely hopes that this is indeed the case.