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Crypto-focused hedge funds are increasingly shorting U.S. dollar-pegged stablecoin Tether (USDT) amid a bleak market outlook nearly a month after the implosion of terraUSD (UST), WSJ said in a report on Monday.

“There has been a real spike in the interest from traditional hedge funds who are taking a look at tether and looking to short it,” Leon Marshall, head of institutional sales at Genesis, said in a statement. Marshall added the positions were worth at least “hundreds of millions” of dollars.

Genesis and CoinDesk are independent subsidiaries of Digital Currency Group.

Genesis said short positions increased after the multi-billion dollar implosion of UST. Prices of the algorithmically-controlled stablecoin plunged to a few pennies in late May, causing contagion risks damaged within the crypto space that affected prominent crypto lenders and trading funds.

Some funds are shorting USDT as a bet on the broader economy as the U.S. Federal Reserve raises interest rates to curb 40-year-high inflation. Others are concerned about the quality of the assets backing tether, as per WSJ.

Stablecoins like Tether are backed by fiat currencies and equivalent asset investments such as “commercial paper,” bank deposits, bonds, gold, and cryptocurrencies, as per issuer Tether Global.

The stablecoin market has taken a hit since UST’s implosion in May with investors redeeming huge amounts of USDT. In mid-June, investors pulled some $1.7 billion from Tether in a week alone, as reported.

Tether’s market capitalization has fallen over $20 billion since mid-May, CoinGecko data shows.

Funds like Fir Tree Partners and Viceroy Research LLC have previously bet against Tether, citing opacity about the asset’s actual backing and the lack of audited reserves.

Tether officials have, however, denied such risks exist. In June, Tether said rumors of its portfolio being “85% backed by Chinese or Asian commercial paper” were “completely false” and likely perpetrated by those looking to generate “additional profits from an already stressed market.

In April, a Tether spokesperson told MarketWatch that said that the short-sellers seem to be involved in a “clever scheme to raise capital from those less knowledgeable, by leveraging on disinformation with the end goal of collecting a management fee.”

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