Tether short sellers are on the rise despite the company’s repeated assurances that its reserves are fully backed. A so-called liquidity pool that allows traders to swap between the three biggest stablecoins still shows an elevated supply of Tether, with the token accounting for 65% of the total as of Friday.
This week saw a drop of almost $600 million in the market value of Tether, bringing the total declines since just before the TerraUSD collapse to around $17 billion.
Company Eases Concerns
Since TerraUSD crashed, Tether Chief Technology Officer Paolo Ardoino has frequently used Twitter to reassure investors. In an effort to ease concerns about inadequate reserves, Ardoino stated that the company honored withdrawals totaling $10 billion after TerraUSD’s collapse. However, hedge funds have made significant bets on Tether’s value declining ever since.
Prior to the TerraUSD unpeg event on May 6, Tether held a 29% stake in Curve Finance’s 3 token pool. On May 12, it rose to 82%, which led the stablecoin to momentarily lose its peg to the US dollar.
A Tether representative told Bloomberg that since USDT is a widely used and accessible stablecoin, it is common for many investors to retain their money in Tether and trade it for other assets.
On Curve’s 3pool, where traders can trade between Tether, USDC, and DAI, Tether’s supply share stood at 29.9% on May 6, just before TerraUSD began to deviate from its anchoring. This share jumped as high as 82% on May 12 as the TerraUSD crisis deepened, briefly knocking Tether off its own peg.
While Tether’s share of supply has since declined, it remains far above pre-TerraUSD crisis levels. And it has reversed some of the decreases after the Journal report. The 3pool platform handled about $117 million in trading volume on Friday.
