Tether has been a hot potato for years, but the current events may finally push it over the edge. Here’s how you can profit from it.
Trust into stablecoins is at an all-time low. The UST/Luna collapse showed many investors that stablecoins do bear a risk and that the huge rewards from staking are there for a reason. While stablecoins were used as a safe haven in previous crashes, it’s safe to assume that people will now move to USD directly.
Tether has been known to lie about their reserves for years. All the time, it was obvious that the only thing that could trigger a collapse was a massive bankrun, something we might see in the near future.
**How you can profit**
You can short the USD/USDT pair on Kraken for example. I would strongly advise against doing this on Bitfinex or FTX, as they will be able to manipulate prices there much easier – more on that later. The idea behind the trade is simple: If you short USD/USDT, you will make profit when USDT loses it’s peg, but your possible loss is rather limited since USDT is not likely to go over 1$. So you have a potential 100% profit with a risk of (at the time of writing) a \~2% loss if it goes back up to 1$.
**So where’s the kicker?**
Obviously, Bitfinex is not very keen on seeing their business ended. They will do everything they can to keep USDT from collapsing – that includes playing dirty.They will likely attempt to do a shakeout – driving the price up to significantly above 1$ to cause a margin call on short orders, which can potentially trigger a cascading effect, closing most shorts. They’ll have an easier time doing this on exchanges they control. This is why you definitely should not attempt this on FTX or Bitfinex – they’ll have complete information on all triggerpoints for margin calls and can pull it off easily there.
**What can you do?**
Open the order on an reputable exchange that is rather independent from Bitfinex, like Kraken. Be sure to place a stop order at a bit above 1$ – if a shakeout happens, you don’t want to be caught in it. Also, already set a closing order – the most extreme dip will likely be rather short before stabilizing a bit again, so having your order pulled off without your manual interaction is valuable. Also, make sure you don’t run into a margin call because any of your other assets that provides the margin loses it’s value.
A USDT Collapse will cause a nuclear crypto winter. This can be your hedge against it. Do with it what you want.
EDIT: If you are already holding USDT and don’t feel comfortable shorting, there’s another way you can potentially profit from it: Set a sell order for a price greater than 1$. In this case, if a shakeout happens, you’ll make a nice profit.