US hedge fund Fir Tree Capital Management has just taken a "significant" short position against the stablecoin Tether (USDT).
Bloomberg has reported citing the firm's clients that the company’s analysts expect a drop in the value of the asset issuer's reserves.
Fir Tree has found a way to invest short USDT as part of an asymmetric trading strategy that involves little risk compared to the potential gain.
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Notably, Moore Cayman audit firm Moore Cayman has confirmed USDT was 100% backed by Tether Holdings Limited reserves as of July 30, 2021. At the same time, the 49% collateral consisted of trading securities in the amount of $30.8 billion.
According to Fir Tree analysts, most of USDT's "paper" reserve is associated with Chinese developers. Following the suspension of payments by Evergrande, China's largest developer, the local real estate sector is suffering a crisis.
Although in September last year Tether stated the company "does not hold any commercial paper or other debt or securities issued by Evergrande," Bloomberg later discovered the stablecoin’s backing included short-term loans to large Chinese companies.
Analysts at the firm expect some securities in Tether's holdings to lose value, creating potential collateral issues, according to hedge fund clients.