Hedge funds have Tether in their crosshairs as they keep betting against the stablecoin following TerraUSD’s collapse last month.
Larger numbers of traditional hedge funds are shorting Tether, the world’s biggest stablecoin, through major crypto brokerage Genesis Global Trading Inc., the Wall Street Journal 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,” Genesis’s head of institutional sales Leon Marshall said to the Journal.
Short sellers have betted against Tether for the past year but intensified their bets after another stablecoin, TerraUSD, crashed last month after losing its peg to the US dollar. Tether also briefly lost its $1 peg and fell to $0.95 during this before regaining it.
Almost all the shorts have been by European and US hedge funds. Marshall said hedge funds are betting against Tether due firstly to concerns about the broader economy, as the Fed’s rate hikes to tackle higher inflation have scared investors away from crypto.
Secondly, worries on the quality of assets backing Tether have fuelled the shorts, and the stablecoin has come under intense regulatory fire over its reserves.
Bets against Tether come as the crypto market experiences a drastic rout, with the prices of major cryptocurrencies plummeting from all time highs.