Tether going to zero would mean almost nothing, usdc or the even more safe busd is waiting in the wings to fill the liquidity gap.
That's the problem with these hot takes about the crypto market being dependent on tether, it's just fud.
If tether disappeared overnight I'm not sure if it'd even affect the rest of the market given that it's inevitable failure is probably baked in or at least wouldn't be a huge surprise.
Tether suddenly becoming impaired IMO would certainly have massive effects on the rest of the market, you cannot remove ~$70b of HQLA from a system worth ~$1-2T and not have negative effects.
Following some sort of credit event, I expect a period of massive volatility (hours to days), I would expect USDC to trade at a premium for several days, ETH and BTC would whipsaw, but likely end up at higher relative levels as tether holders flee/get liquidated and in turn bid up (relative) "safe haven" assets.
10's of DEFI protocols would go bust due to the peg breaking and AMM /Yield farms would likely also see massive loss of AUM and substantial impermanent loss applied to LP positions.
It will be messy, but necessary for the long run health of the system. Anyone holding tether or who has long exposure to tether at this point is taking hefty credit risk (a risk they are not being compensated for - which is a total amateur move) with total disregard for the many blatant red flags. Their is very little opportunity cost for using something like USDC over tether, it should be a simple decision for most users...
https://blog.seedly.sg/best-stablecoins/
Fwiw, I still use tether daily, the markets are far more liquid. If I'm holding it overnight I convert to busd or hard currency.
It would be a blood bath. Almost everyone who works professionally in crypto agrees with this statement.
Moreover, BUSD is kind of a joke and the only thing I ever use it for is trading a couple BUSD denominated binance swap products.
What if loads of people buy a lot of Bitcoin using Tether, thereby increasing the price of Bitcoin?
From what I understand, this isn't a hypothetical.
There may have been many people that agreed to pay the inflated price but that was without the knowledge that it was inflated in the first place by fake money. Not to mention the pumping and dumping that was done to turn their fake money into real money. That should damage confidence, in Bitcoin especially, but it won't because people are blinded by thinking they will get filthy rich off of it.