For a while I had a 5x leveraged tether short (with a USDC long deposit reserve) on a decentralized exchange. I was briefly making money through this on arbitrage but it fluctuates rapidly.
Oh, this is perfect, I'm going to do this with 100k. Also, yeah it is shorting, but it's honestly less convoluted than how I have to do it on Kraken. + I get profits off staking.
Edit, did it with $500 as a test, I am arbitraging 0.5% as I took the tether I borrowed, turned it. into USDC and staked it. I am getting paid 0.5% to short Tether :O
Shorting Tether is pretty strange, since if it works as designed it will essentially never increase in value, there's no risk on that end. And if it's a fraud that collapses, the short pays off big.
Can somebody explain how that effect would get priced into the market? I can't think of another commodity like that.
One major caveat; You're not shorting BTC/USD, you're shorting BTC/USDT. As long as Tether is managed by a shady, unregulated corporation with zero transparency or oversight, that has full freedom to create as much artificial liquidity as they see fit, that seems like a very bad bet.
No, Tether has prevailed because 1 USDT has remained redeemable for approximately 1 USD since inception. That's it. More entities shorting USDT would not change that fact.
So, by all means, find a venue to short USDT. Build one if it doesn't exist. If lucrative enough, you will likely find parties willing to take the other side of that bet.
(Outside of the USA) On Poloniex you can short USDT vs. USDC (USDC is the non-sketchy version of Tether) and make your riches. If you put your money where your mouth is! https://poloniex.com/marginTrading#usdc_usdt
The more I think about it, the more I think that this is actually a pretty genius trade. The price of Tether is effectively capped at 1 USD, so it's not like a short position could blow up in your face. All you'd stand to lose is the interest.
I mean, who says people aren't doing that? I know one fund that is short tether.
The downside is that you have to trust USDC at the same time and if tether breaks, there is n o guarentee taht USDC holds its peg
so you can lose the following ways
1) be wrong and tether is fully backed
2) be right but way too early
3) be right but the peg only breaks by a couple of pennies so you really make peanuts for the risk you put on
4) be right but USDC also breaks and you end up losing
5) be right but6 tether falling sinks crypto so there is not real crypto position you can hold in this case that makes you money.
6) Counterpary/exchange risk, you have to close out your tether position or remove it from the exchange, in the case that new broker that Tether is worthless, every exchange would suddenly lock out withdrawals and go down like they do each time there is a crash, which means you may end up losing even if you were right.
I mean there are so many ways to be right and lose on this trade:) Its not something too many hedge funds would dare put on.
The upside to being right just isn't anywhere near enough to be in this trade in a fully leveraged way and this is crypto and everyone accepts its manipulated in some way so its hard to rationalize leveraging this trade up to make any meaningful return
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.
Six months later and people still neglect the existence of decentralized exchanges![1]
On Compound, they have a frustratingly big collateral buffer, and have built up reserves over time from past liquidations, so it’s really hard not to get your collateral back.
(Caveat: To be sure, there could be a latent smartcontract vulnerability here.)
As in the thread, it is much harder to get a flash rally on decentralized exchanges, since you’d have to keep it up for enough blocks to trigger the Oracle.
If I were going to (further) short Tether, I would convert a bunch of USD to USDC and deposit it on Compound, then borrow ~65% of it back as Tether, which I would immediately convert to USDC then USD to invest more safely. You could also put some of than back into Compound to increase your USDC collateral buffer.
I've been doing some small-scale arbitrage trading in Uniswap and other Defi exchanges. As part of that I hold a fair bit of Tether, USDC and other stable coins.
The reason being is that I want to keep my capital pegged to the dollar, but need something that's native to the Ethereum blockchain. If there's a trading opportunity, I need the ability to swap Tether for [X] token in a single blockchain transaction. There's no time to route actual dollar deposits from a real bank.
Considering that there's something like $13 billion locked in all the various defi protocols, that's a lot of potential demand for stable coins.
The only realistic way to short tether is to take a DeFi Tether loan and use some other stablecoin (You must trust that it's peg will hold longer than USDT's) as collateral.
I've been wondering, what's the downside with Tether shorts? If it remains stable, then the shorts don't move in value. USDT is unlikely to moon above $1.00. If it collapses then the shorts print money. All you pay is the fees associated with creating and maintaining the positions. Seems like it's all upside.
I'm assuming there's some counterparty risk with exchanges blocking trading of synthetic derivatives if the underlying asset is imploding?
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