It does seem inevitable that Tether implodes. Whoever is holding those coins at the time will lose once crypto players decide to stop playing with tethers. Whether they lose all or partially is unclear. The loss may the total value locked or recently purchased in tether. Perhaps it is the same as the market cap due to the fast turnover in the coin.

My conjecture is that Tether's collapse will result in temporary losses to crypto values overall. It will likely lead to regulation. But with regulation the legitimacy of DeFi in particular will be more solidified and raise the markets. This is my guess for the next 5 years or so.

Yes this is probably the biggest risk to current crypto market values. However I wonder if the other stablecoins will be able to quickly replace it with minimal market dislocations if/when Tether implodes.