What Effects Did the Tether Reserves Breakdown Have on Bitcoin and The Market?

[Pmalek]

Biden Administration to Congress: Put Stablecoins Under Federal Supervision – Or We Will

Centralized stablecoins like Tether can already do whatever they want with coins on exchanges or private wallets. Your coins can get frozen no matter where they are. Giving another party (like the US government) the same possibility of making decisions about which coins should get frozen is a potential threat for the future. But we already have decentralized stablecoins like DAI, they can't control those. I hope more people will turn their backs on Tether and pick safer alternatives.

[bbc.reporter]

@Pmalek. Much of the people might not have comprehended what is being argued or what created arguments are being made from the Biden administration’s statements hehe. Similar to the growth of casinos and internet gambling, the American government through policy, used the credit card companies to monitor and control how much comes in and how much comes out of the internet casinos. It might do this again on the cryptospace through policy and use the stablecoin issuers to control and monitor what comes in and out.

[bbc.reporter]

It appears the forum cave trolls' speculation on iFinex, Bitfinex, Tether, that they are holding commercial papers of Chinese real estate developers might be true. It might not only be true, this hedge fund has ordered a financial instrument to be created to short Tether. This is very much similar to when Michael Burry had a financial instrument created to short mortgage backed securities on 2007. Everyone thought he was crazy. Watch it in the movie The Big Short.


Christian Bale as Michael Burry in The Big Short

Hedge Fund Fir Tree Bets Big With Short of Stablecoin Tether

Fir Tree Capital Management is making a substantial short wager on Tether, the stablecoin that’s under intense scrutiny from regulators.

The $4 billion hedge fund, founded by Jeff Tannenbaum, constructed a way to short Tether in an asymmetric trade, meaning the downside risk is small and potential to make money is great, according to clients of the firm.

Fir Tree is betting that its short wager could see a payday within 12 months and its thesis against Tether centers around the coin’s roughly $24 billion in high-yield commercial paper, much of it the firm believes is tied to Chinese real estate developers.

China’s real estate sector is in crisis, led by China Evergrande Group, the world’s most indebted property developer that is heading toward a government-driven restructuring. While Tether has said it doesn’t own Evergrande paper, Fir Tree expects that some of the paper it does own will lose value, causing a potentially large drop in the reserves it holds, the investors said.

Source https://www.bloomberg.com/news/articles/2022-03-11/hedge-fund-fir-tree-bets-big-with-short-of-stablecoin-tether

[bitgolden]

~snipped

These type of deals could happen only because the logic of stablecoin is to be stable, so the risk is low because other side can't get much from you when it doesn't go down, it is expected to not go down. So, basically assume it this way, you pay 1 dollar for every month that it doesn't go down, but if one day it crashes you get paid 400 dollars instead. Why the difference?

That stability is the difference, you know that tether suppose to be stable and if you do not take that bet you accept it is not stable at all and could go down, many do accept it as stable so take that low bet. I am sure even if this fails, they won't lose too much so it is a good bet.