Investors in the hedge fund Fir Tree Capital Management claim to have devised a way for shorting the stablecoin tether. According to a report, “customers of the firm” believe there is a lot of money to be made by shorting the world’s largest stablecoin.
Hedge fund devised a method to short Tether, according to investors, and Fir Tree Bets Short will pay off in 12 months.
The market capitalisation of the stablecoin tether (USDT) topped $80 billion on March 6, 2022. Tether is the most valuable stablecoin in terms of market capitalisation, accounting for 4.43 percent of the total value of the crypto economy ($1.8 trillion) on March 11, 2022.
According to few people close to Fir Tree Capital Management’s clients, the hedge fund has purportedly devised a technique to short the cryptocurrency tether (USDT). While the shorting trade may appear nonsensical given USDT’s long-term stability, Fir Tree believes its short bet will pay off in about a year.
Fir Tree’s thesis, according to the report, is $24 billion in USDT backed by high-yield commercial paper. Much of that exposure, according to the hedge fund, is linked to China’s real estate firms. China’s real estate market has been in severe circumstances, according to media source, with the government reorganising the real estate behemoth Evergrande Group.
“While Tether has said that it does not possess Evergrande paper, Fir Tree thinks that some of the paper it does own will lose value, potentially causing a big reduction in the reserves it holds,” Burton writes in her analysis on Fir Tree’s stablecoin short thesis.
Fir Tree enlisted the help of outside experts to research the concept.
There have been several ideas in the crypto realm about the corporation Tether and high-yield commercial paper. Tether released its quarterly assurance report in April 2021, detailing how USDTs were supported.
Since then, the corporation has continued to issue assurance reports. According to MHA Cayman’s latest Tether assurance data, the business has less commercial paper than in recent quarters.
“Fir Tree began investigating into shorting Tether in July and conducted research, including hiring third-party specialists,” Burton was told by Fir Tree investors. “If there is significant customer interest, Fir Tree is considering establishing up a separate fund for the sole purpose of shorting Tether,” the report continued.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
