'Coordinated' Attacks: Tether CTO Confirms Crypto Hedge Funds, Traders Short The USDT Stablecoin

Tether's CTO Paolo Ardoino has confirmed that cryptocurrency hedge funds and traders have been trying to short the U.S. dollar-pegged stablecoin Tether following the implosion of the TerraUSD (UST).

Short sellers have been boosting their bets against the world's largest coin, Tether, amid the massive market selloff, making investors doubtful about the stability of some companies in the cryptocurrency world. Ardoino confirmed these "coordinated attacks" by hedge funds on a Twitter thread, noting that these include "a new wave of FUD, troll armies, clowns, etc."

These crypto hedge funds, according to the executive, attempted to achieve their goal by short-selling on spot markets, using perpetual contracts and creating DeFi pools imbalances. If those attempts succeeded, those hedge funds would have put massive pressure before they would buy back USDT at a remarkably lower price.

"Tools: USDt/USD perps (the perfect attack vector that offers an asymmetric bet), spot short selling, DeFi pools unbalancing, ...Goal: create enough pressure, in the billions, causing tons of outflows to harm Tether liquidity and eventually buy back tokens at a much lower price," Ardoino disclosed.

Several sources reported attempts to short-sell Tether since last month, but it was only last week, through an interview with the Wall Street Journal, that a firm explicitly confirmed the speculations. According to Genesis Global Trading head of institutional sales Leon Marshall, traditional hedge funds shorted the U.S. dollar-pegged stablecoin using his brokerage, noting that significant trades involved "hundreds of millions of dollars in value."

"There has been a real spike in the interest from traditional hedge funds which are taking a look at Tether and looking to short it," Marshall said. The executive also noted that short positions surged following the implosion of the TerraUSD UST, which happened in May.

Hedge funds based in the U.S and Europe reportedly sought out opportunities to short the USDT-based stablecoin while crypto firms based in Asia were the ones on the other side of the transactions, revealed Marshall.

Tether was trading down 0.06% at $0.9988 with a 24-hour volume of $40,538,004,279 as of 1:09 a.m. ET on Tuesday, according to the latest data by CoinMarketCap.