A number of hedge funds have increased their short bets against tether, the $66 billion stablecoin that some industry insiders believe is a crypto catastrophe in-waiting, and potentially on a scale that would dwarf the recent demise of Sam Bankman-Fried's FTX/Alameda Research empire, according to a report by Bloomberg.

The report cites unnamed sources as revealing that Fir Tree Capital Management and Viceroy Research are among the firms betting against tether, in the belief that ongoing turmoil in the crypto market could push tether’s value below its promised parity with the US dollar. 

Tether is the world’s third-most traded token, behind bitcoin and ether, and is considered an integral part of the global crypto ecosystem, However, the stability of its exchange rate with the dollar has been questioned repeatedly since it's launch in 2014. 

In addition, US Attorney Damian Williams, who is leading the case against Bankman-Fried, also recently took over a probe into tether and executives behind the stablecoin. The probe is ongoing despite ether and sister exchange Bitfinex agreeing to pay more than $60 million to settle allegations that they misled investors about its reserves.