Rumors swirl that Citadel Capital is behind the UST collapse as Janet Yellen announces stablecoin report.
The hedge fund, well known for its involvement in GameStop’s 2021 short sale, may now be involved in the LUNA short sale and the UST sell-off that began earlier this week. An anonymous source denied the rumor saying:
“From a factual standpoint, Citadel does not trade stablecoins, including UST”.
The leak comes from an anonymous post online citing that Citadel borrowed 100K BTC and used it to short UST. Critics also note that Janet Yellen recently revealed plans for a stablecoin report.
Yellen hired Citadel to break UST peg so US government can increase regulatory scrutiny on crypto send tweet
—Steven (@Dogetoshi) May 10, 2022
Yellen announced this report because stablecoins “threaten financial stability“. Until the de-pegging of TerraUSD, the biggest threat from the perspective of the crypto community was the apparent lack of transparency around Tether’s reserves. However, the risk is evident today, as the UST is trading well below its dollar peg.
Bitcoin analyst Dennis Porter said
“Remember my words. The failure of UST will be used as evidence by policymakers to regulate stablecoins to the death and champion CBDCs. It’s not good.”
As seen in the video below, Yellen has already used the decline in value of UST to justify his anti-stablecoin stance before the Senate Banking Committee.
—db (@tier10k) May 10, 2022
Citadel has previously stated their desire to become market makers in the crypto space, but currently there is no hard evidence to suggest they were behind the crash. Another rumor has surfaced that Jump Capital, a Terra supporter, is plotting a $2 billion bailout for UST.
Whether this is true or not, the need for a bailout is reminiscent of the origins of crypto, when bank bailouts were considered part of the motivation behind the creation of bitcoin. If stablecoins need hedge fund bailouts, is that different from government bailouts of banks?