Reappearance of FUD: How to Hedge USDT Short on the Chain?

Original author: Thor Hartvigsen Translator: Kxp, BlockBeats

Today, I noticed that USDT’s share in Curve’s 3 pool has exceeded 60%, which has attracted high attention from the market due to this serious over-concentration.

Faced with this situation, I couldn’t help but wonder whether it was groundless panic or whether large institutions had knowledge that we didn’t have?

As a professional investor, I don’t want to take a chance on this matter, so I chose to hedge USDT on the chain. Here are my specific operating methods.

Curve, as the main stablecoin exchange platform, has the deepest liquidity of its protocol. However, when Curve’s 3 pool is unbalanced, stablecoin exchanges become difficult and are susceptible to large slippage risks.

Currently, this is the case because many people are selling USDT.

If you want to convert USDT to other stablecoins, there are several options to consider, such as USDC, DAI, FRAX, or decentralized stablecoins like LUSD on the mainnet or VST on Arbitrum. Additionally, you can easily short USDT on the chain:

• Go to a money market like Aave or Radiant Capital

• Deposit low-volatility collateral, such as USDC or other stablecoins that are not USDT

• Borrow USDT with these collateral

• Convert the borrowed USDT to other stablecoins

• (If necessary, you can also cycle through to leverage the short position)

If USDT becomes unanchored, you can repay the loan and profit from it.

Note that on the Aave Ethereum mainnet, the cost of borrowing USDT is about 2% APY, but on Arbitrum it is 20%; and the cost of borrowing USDT on Radiant is 10%, but if you are eligible for RDNT rewards, you can borrow for free.

Regarding whether USDT will be unanchored, I personally believe it won’t. However, since I cannot know the truth behind the scenes, I can only take a wait-and-see attitude.

Given that I already have funds in Radiant, this short operation is free for me and I can profit from it.

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