The infamous USDT(Tether) is in trouble. A lot of hedge funds are shorting it and I think they are going to make a good profit from it.
IMO, USDT is pretty much toast. It's just a time bomb waiting to explode. They have 15% of risk assets (corp bonds, digital currency...) at the end of Q1 2022 and 30% commercial paper that's subject to currency risk. (USD went up ~8% since end of Q1). If we are being charitable and assume the risk assets went down only 20% and commercial paper went down 5% and the other reserves keep their value at 100%, they would be down around 5% for the asset base. That’s when they had 82B of market cap (with a very small buffer/equity of $163M), 15B has been redeemed at this point. If we do the math 82B*0.95-15B = ~63B. They have around ~4B shortfall right now assuming their attestation was accurate. Most likely, their shortfall is way bigger. If the redemption continues, that 4B would become a larger and larger percentage. I couldn’t imagine what their attestation of Q2E 2022 will look like. But we shall see in the next few months.
If I were a hedge fund, I will short USDT, buy USDT at $0.999 and redeem. As long as my outstanding shorts are bigger than my USDT holdings, I am in the money. Once I got the redemption, I will keep buying and redeeming until USDT blows up. If USDT tried to repay in a BS way like over many installments. I will make a big noise on media and that would trigger more redemptions. I am sure many hedge funds are doing that. Let’s wait for big whales like Ken Griffin to do it and take USDT down and finally crypto would be in a healthier place to invest.