Fir Tree Capital Management, a hedge fund with $4 billion in assets under management, has made a sizable short bet against the stablecoin tether (USDT), according to a Bloomberg report on Friday.
- The position was structured as an "asymmetric trade," meaning the downside risk is small and the potential payoff is large, according to Fir Tree clients, Bloomberg reported.
- The hedge fund had started to explore taking a short position on USDT last July, according to the report.
- The firm reasoned that much of the $24 billion in commercial paper backing the token is tied to Chinese real estate developers, some of whom are struggling, and so if the paper loses value, that would potentially lead to a big drop in both Tether's reserves and the coin's price.
- Fir Tree is betting its trade will pay off within 12 months, the Bloomberg report said.
- The firm is also mulling setting up a separate fund just for shorting tether if there’s enough client interest.
- Fir Tree didn’t immediately respond to CoinDesk’s request for comment.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.