Why is a big Hedge Fund betting against a stable coin? - Crypto in Plain English - Episode 137 - by cryptohunt.it

Why is a big Hedge Fund betting against a stable coin?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

A short seller called Fir Capital is making huge bets against Tether. A hedge fund betting on the decline of an investment wouldn't be newsworthy under normal circumstances, but this is different.

Tether is a stable coin, and as such you'd expect it would always be the same value as the US dollar. And hedge funds speculate on huge price changes, not stability... So, what is going on here?

Essentially, Fir Capital is saying they don't believe the coin is stable. In fact, they are so sure that they bet $4bn on the collapse of Tether.

How does this make sense at all? Well, unlike other stable coins, Tether is not transparent about the investments they have made with the money put into their stable coin. Their reserve, also called backing, is suspected to be tied up in large Chinese real estate companies, and the hedge fund thinks those will lose a lot of value soon. This would make Tether unable to repay a larger amount of users who may want to exchange their USDT back into dollar.

It's the perfect bet if you think about it. Tether is never going to be worth over $1, representing almost zero risk for the hedge fund. And if things do go wrong for Tether, they may win big time.

A Hedge Fund betting against a crypto project for lack of transparency – ironic, but probably a good thing for consumers in the end. Just don't get caught in the middle. Goes to show: Always do your research and fully understand what's going on under the hood.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.