Tether chief technology officer Paolo Ardoino has confirmed that stablecoins have been the subject of a "coordinated attack" by hedge funds seeking to short cryptocurrency assets pegged in dollars.
Speaking to his 151,600 Twitter followers on Monday, June 27, Tether executives responded to reports that hedge funds have borrowed millions of dollars to sell USDT since Terra (LUNA) collapsed in May.
He alleges that hedge funds tried to create "billions of dollars" of pressure to "harm Tether's liquidity" with the ultimate aim of acquiring tokens at a much lower price.
The CTO also made allegations that some hedge funds trusted and helped spread "FUD" (fear, uncertainty, and doubt) about stablecoins.
The notion that it is not 100% supported, is issuing tokens from the "air", has significant exposure to struggling companies and Chinese votes, and other stories have been spread by its competitors through the "troll community", He said.
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I have been open about the attempts from some hedge funds that were trying to cause further panic on the market after TERRA/LUNA collapse.
It really seemed from the beginning a coordinated attack, with a new wave of FUD, troll armies, clowns etc. https://t.co/hhcsgHV1Ow— Paolo Ardoino 🕳🥊 (@paoloardoino) June 27, 2022
As part of 12 parts of a Twitter thread aimed at refuting these rumors and criticizing those spreading FUD, Ardoino argued that the company has cooperated with regulators and has stepped up transparency efforts, as well as noting its recent commitment to phasing out commercial exposure.
"Despite all the public endorsements of third parties, our cooperation with regulators, our efforts to enhance transparency, our commitment to phasing out contact with CP, and our move to the U.S. Treasury, Our settlements,.. They continue to assume that we, Tether, are the bad guys."
He argued that Tether "has never failed in acquisitions," adding that in the last 48 hours alone, Tether has acquired about 10% of its total assets, which he said is "almost impossible even for banking institutions."
He also confirmed that Tether has reduced its level of commercial exposure from $45 billion to $8.4 billion this month, intending to erase its commercial backing "in the coming months."
However, it seems that Ardoino's comments did little to hold back the tide of short sellers hoping to profit from the cryptocurrency's bearish potential, which is currently just below the peg at $0.9989.
On June 27, a report from the Wall Street Journal quoted Leon Marshall, head of institutional sales at Genesis, as saying that there had been an increase in transactions to sell Tether through its brokerage platform, especially in the past month.
"There has been a real spike in interest from traditional hedge funds who are looking at Tether to find a way to short it," Marshall said. "
Short selling is an investment strategy where the investor borrows assets and immediately sells them on the open market, then buys them back later at a lower price to pocket the difference. It allows an investor to profit from the fall of a stock or asset.
Marshall added that the majority of short-term trading comes from traditional hedge funds in the United States and Europe, with many trading becoming of interest following the collapse of the TerraUSD stablecoin (UST) in May.
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