I believe that is not even remotely true.
Most Bitcoin users I know have never touched tether in any form.
Rather, what you're seeing is that there are a multitude of casinos operating under the guise of "exchanges" which have absolutely no access to fiat -- usually because they're fly by night shady operations if not outright scams. All these things use tether due to having no fiat access. All of these also pump out enormous amounts of fake "volume" that is ignored by most people with a clue.
Checkout the bitwise presentation to the SEC: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
And their paper on it: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
Shorts denominated in USDT will get absolutely decimated, pushing other assets higher.
Exchanges using Tether will enforce a maximum withdrawal, pushing other assets higher.
Smart money will buy USDT at a discount once their reserve details are made publicly available. If it's FUD they'll make an absolute killing.
There's 3 possibilities here: 1. Tether is completely backed 1:$1 (highly unlikely) 2. Tether is partially backed, the reserves are greater than the outstanding 3. Tether is partially backed, the reserves are less than outstanding
Only 3) will have a downward price correction. If they've been buying BTC like everyone here has suggested then 2) is the most probable, since you know BTC is at yet another ATH.
If it becomes public that tether has excess reserves, the FUD will disappear silently. Worst case Tether says they will slowly sell off to reach 1:$1 over the next 12 months.
Except your existing assets are dropping to 0, so you don't actually have that much buying power anymore. So you'll only see a fraction of a rise. Meanwhile whoever sold you the tether probably cashed out a while back.
On unbanked exchanges this is true. However the next step is that people will transfer those inflated assets to banked exchanges to exchange them for fiat, pushing the price down. See Gox, Mt.
I don't know why you gave possibility 1, given Tether have admitted it is not completely backed. Since the operation has refused over many years to provide proper accounts, breaking their own promise that they would, you would be foolish to bet on a rosy picture of their finances.