There has been nothing but Tether doom and gloom since 2017 and yet here it is still at 1.0000 If anyone thinks this will drop, now is the opportunity to short, I suppose.
Circa 2020: There has been nothing but Wirecard doom and gloom since 2019 and yet here it is still at 115. If anyone thinks this will drop, now is the opportunity to short, I suppose.
Shorting Tether is a great play. Either everyone loses faith and nobody trusts them anymore or.... it stays at $1. You are not going to lose. You just have to pay funding fees for your short which on FTX is around 4% a year.
Do you think there is a great chance that Tether is a massive scam and will find its doom within the next 25 years?
I think the better trade would be to do a hedged short against bitcoin, perhaps using futures; if Tether collapses, Bitcoin is going to get hurt as well.
This assumes that USDT/USD somehow holds at the same time USDT collapses? What will actually happen is that USDT will flood into BTC, driving BTC up in terms of USDT and down in terms of USD.
If I short tether, I am borrowing tether and selling it immediately. I get the proceeds from the sale immediately.
The person who lent me the tether can be left holding the bag - I can't. That's because I, the short seller, am not owed anything but the counterparty.
It's like taking out a loan - if the bank goes bankrupt, you don't lose anything since you _still_ have the cash.
Sure, you get "paid", but in reality you're still out money because you had to put down more than you got paid as collateral. That collateral can disappear.
You pay collateral to your broker, not the counterparty.
Also, if you have margin, the broker will lend you collateral and in that case you wouldn't have put up anything from your side (apart from interest payments).
Given how deep FTX is into USDT, it's rather unlikely they'd survive a Tether implosion, and your short position will there will evaporate in a puff of smoke.
Is there a way to short tether without either significant counterparty risk or absurd interest rates? Looking at Kraken, if I'm reading the chart correctly, it would cost 0.01% / 4 hours to short tether, works out to be a positive-sum bet if you think there's more than a 20% / year chance that tether will go to zero, and you think the counterparty risk is minimal.
However, I'm not sure how likely Kraken is to take the money and run in the event that tether collapses and I have a short position. It also looks like you can do [mumble mumble borrow tether on Aave collateralized by other crypto somehow] which currently costs about a 12% / year, but if I'm understanding correctly that cost is not fixed and would likely go up significantly if tether looked likely to crash.
Can someone who knows more about the topic confirm whether the cost is actually between 12 and 20% per year and the counterparty risk is minimal, and whether or not there are non-obvious footguns with either of the above approaches to shorting tether?
