On Friday Bloomberg reported that hedge fund Fir Tree Capital Management is taking a substantial short position on stablecoin Tether, the stablecoin with a market capitalization of $80 billion.
Major competitor stablecoins USDC and Binance USD hold all backing assets in cash and government-backed treasuries, but Tether only invests half of its funds in this low risk manner, with the balance earning a yield that goes to the issuer, not the stablecoin holders that bear the risk.
Fir Tree, a $4 billion hedge fund, began looking at shorting Tether in July last year. It reportedly developed a way to short the coin while minimizing downside risk and maintaining a high payoff potential. It sees Tether’s $24 billion in commercial paper as the coin’s main vulnerability, believing much of it is connected to Chinese real estate developers.
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