I know it seems simple to short Tether, but in practice there doesn't seem to be a safe way to do it such that if the value plummets to almost zero (and takes much of the crypto ecosystem with it, including some exchanges) you could actually guarantee you'd get paid in US dollars at the end of it all without a long lockup period.
You could do something like buy Coinbase puts or something, but there is so much volatility baked in already, and there is no guarantee that (say) Coinbase actually falls if Tether does.
If you can think of a pure Tether short that still will work if trading is halted and exchanges fail, I'd love to hear about it.
Ofc, for servicing this liability in tether, you have to pay interests in USD, as long as the market stays irrational.
You need to find a large sleepy holder of Tether, fully bullish, who wants to make some easy premium money on your back while you make riskier short term downward bets on their back. A lawyer, a contract, a repayment schedule and hop, the matter is settled. We do that everyday in my investment bank in Hong Kong, with pension fund partners holding large inventories of stocks for their own clients and who dont know what to do with all that sleeping inventory.
You can contact us or our competitors if you have above 200k in cash to invest in the short and we'll find you counterparties for a fee. If you plan to short regularly a few millions a day, DM me.
Ofc, we d never touch a Tether short, we re not as insane as the crypto market. I d advise you to only short on short term bets, with full transparency with your counterparty so you avoid any sort of surprise. You should also pay a bit to hedge a catastrophic reversal, we have entire desks of people for that, so you can pay a bank for that service.
Why? There are plenty of US-based, regulated and audited stablecoins out there. You could use them as collateral to short Tether.
I will borrow your Tether for a 20% premium for 3 years. Are you in?
- Take out a loan of USDT, using a stablecoin you trust as collateral
- Immediately trade all USDT into your stablecoin
- If the USDT price crashes, buy it up to repay the loan.
e.g. Binance lets you borrow 800k USDT with 1.23m collateral. Over 180 days, interest paid would be 36k.
Say USDT crashes and you repay your loan at 10c/USDT - you would pay at most 84k to settle the loan. You then end up with 1.94m, a 58% return on investment.
It's probably not that simple however.
What happens if trading is effectively halted, so it's simply no possible to buy the USDT back later?
Is there any derivatives market in tether to allow an outsider to open/create a futures contract as a seller (thus, short) that gives them the obligation to deliver tether upon expiry?
I suspect that such matters don't work as you believe they do.
Shorting generally is done by professionals in regulated assets. Tether doesn't seem to meet that requirement. No professional will want to take on short risk in any size in an unregulated asset. Shorting, in theory, has unlimited downside risk (to negative infinity). This would actually be a factor in an unregulated market controlled by scammers, depending (in large part) on the net positions of underlying and derivatives by opposing parties.
I think Tether will collapse, I m not gonna pay you a premium for 5 years barely sleeping before finally the entire crypto space become insolvent. I d rather just tell you to help me convince our representatives to regulate.
Can you not imagine that someone could feel that Tether is likely to fall to zero, and, oh, say, not want to legitimize the cryptocurrency ecosystem by putting any money into it?
Or even (gasp) not have thousands or tens of thousands of dollars to throw around on legalized gambling?