Tether calls USDT short-selling proposition ‘downright wrong’

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Tether, the publisher of Tether (USDT), says hedge funds that tried to short their stablecoin after Terra’s collapse in May are using a statement that is “incredibly misinformed” and “downright wrong”.

In a July 28 blog post, Tether pointed to a June 28 Wall Street Journal podcast in which host Luke Vargas and guest Caitlin McCabe discussed the bearish crypto market and concerns about Tether’s supporting assets as the reasons for short sellers’ hunger for Tether.

Tether said the hedge funds, which saw Terra’s collapse as a reason to short USDT, “have a fundamental misunderstanding about both the cryptocurrency market and Tether.”

“The simple fact that hedge funds view the collapse of Terra as a constructive proposition to short USDT represents the asymmetric knowledge gap between participants in the cryptocurrency market and entities in the traditional financial space.”

In early May, UST dramatically lost its peg and dropped the price of Terra ecosystem’s native token LUNA – now known as LUNC – to fractions of a cent above $60.

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At that time, Tether experienced a 21% drop in market cap from $85.3 billion since May 11, although it is still the largest stablecoin in the crypto market with a market cap of $65.8 billion, according to CoinGecko.

In late June, Tether chief technology officer Paolo Ardoino confirmed that USDT had become the subject of a “coordinated attack” by hedge funds seeking to short-sell the crypto asset.

He claimed that hedge funds have tried to create “in the billions” pressure to “harm Tether liquidity” with the aim of eventually buying back tokens at a much lower price.

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Tether noted in his most recent blog post that several misconceptions about his assets have fueled this short-selling move — including Tether owning significant Chinese commercial paper or Evergrande debt, that USDT was created “out of thin air,” or that Tether has unsecured loans.

“Basically, the underlying premise of this trade is incredibly misinformed and downright wrong. It is further supported by a blind belief in what borders on outright conspiracy theories about Tether.”

In a separate post the previous day, Tether attempted to reaffirm the strength of its financial backing and ability to honor refunds, reiterating that it does not own any Chinese commercial paper and has reduced its total holdings of commercial paper by 88% from $ 30 billion to $3.7 billion last year.

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It added that holdings of commercial paper would be just $300 million at the end of August, and zero commercial paper at the beginning of November.

Related: Tether Strengthens Its Reserves: Will It Silence Critics, Calm Investors?

In the week the UST fiasco began, USDT briefly fell in the open market to a low of about $0.96 as investors dumped tokens, either for fiat through direct redemptions or for other tokens, such as competitor USD Coin (USDC). However, Tether continued to honor fiat redemptions of $1 per token during that period.

The latest financial disclosure on March 31 revealed that 85.64% of Tether’s financial backing is in cash and cash equivalents, including commercial paper.