Fir Tree Capital Is Shorting Tether’s Stablecoin Amid Regulatory Scrutiny

Fir Tree Capital Management is shorting Tether’s stablecoin amid the increased regulatory scrutiny and the fears over ties to the Chinese debt market as we can see more today in our latest Tether news.

Fir Tree Capital is a $4 billion hedge fund and it is shoring Tether as the biggest stabelcoin on the market which is facing heavy regulatory scrutiny. According to the clients of the company, Fir Tree constructed a way to short Tether in an asymmetric trade which means the risk is minimized and the potential to generate profit remains high.

The hedge fund is betting that the decision could generate a profit in 12 months and the company’s concerns center around the provider’s $24 billion in high yield commercial paper which the company believes is connected to the Chinese real estate developers. The real estate in China has been facing a debt of its own led by China Evergrande Group whose liabilities surpassed $300 billion when they missed a debt payment deadline.

Tether on the other hand says it doesn’t own any commercial paper linked to Evergrande but Fir Tree expects some of the commercial paper Tether does own will still lose value. The investors said this could cause a drop in the reserves held by Tether. Tether’s biggest assurance opinion showed a 21% decrease in the commercial paper holdings in the past financial quarter. Back in May, Tether released a breakdown of the reserve for the first time since 2014 the company also said that about 76% of the Stablecoin reserves are held in cash or cash equivalents.

Despite the previous claiming that Tether was backed 100% by cash, the company’s breakdown of reserves showed tht less than 3% of Tether reserves are held in cash. In August 2021, another assurance report found that Tether had a backing of $62.7 million and a total of $30.8 million was made up of commercial paper. The US CFTC hit Tether with a $41 million fine for lying about its dollar reserves back in 2021.

As earlier reported, Ukrainians were paying a huge premium over the US dollar for Tether’s stablecoin after Russia invaded the country in the early hours on Thursday. The price of USDT on the popular crypto exchanges in Ukraine jumped by 5% in the past day to hit 32 Ukrainian hryvnia which is the national currency of the country. Tether’s stablecoin reaches $1.10 per USDT while it is supposed to be set at $1.