Paolo Ardoino, the chief technology officer (CTO) of Tether, told the shocking news yesterday that several cryptocurrency companies tried to short USDT. This means that these companies expect Tether’s stablecoin to drop in price. Is this possible?
Drop of 6%
Currently, this currency is still on par with the dollar, although that was different for a while. During the fall of TerraUST, Terra’s stablecoin, USDT also had a rough time. This currency dropped no less than 6% while UST completely collapsed. It is therefore not entirely illogical that companies saw the opportunity to short.
Companies cause panic
The Tether CTO told us that he has been candid about these attempts by some hedge funds. According to him, these companies tried to “cause further panic in the market” after the collapse of Terra (LUNA) and TerraUSD.
This panic could cause complete chaos in the market, as we often see when the price of bitcoin takes a big hit. At that point, many people are doom-mongering, and when companies go along with that, there is often a snowball effect of panic. “It really seemed like a coordinated attack from the beginning, with a new wave of FUD, troll armies, clowns and so on,” Ardoino tweeted.
Tricks to disconnect value
The CTO explained that hedge funds were trying various tricks to drive down the value of stablecoin. If this had succeeded, hedge funds would have created billions of dollars worth of “pressure” that would cause the price of USDT to decouple, allowing them – in this scenario – to buy back USDT at a lower price.
They have so far failed to do this, and the value of Tether now has the same price as one US dollar. Exactly as it should be, and if we are to believe Ardoino, this would not happen either. He has debunked on Twitter all rumors of an unstable USDT, but whether we can believe him is a second matter.
Tether is often the victim of many rumors, and that’s actually not very surprising. Because of the vague (Dutch) owner and insufficient transparency at crucial moments, Tether (perhaps unconsciously) caused people to have less confidence in this stablecoin.