[eemax]

Isn't it much more likely that Tether is keeping some or most of its reserves in bitcoin, rather than USD, as they claim?

Most people get Tethers from trading on bitcoin exchanges, not from buying it with USD. If Tether accepts payment for tethers in bitcoin, they're supposed to immediately cash the bitcoins out to fiat. But my guess is they're not actually doing this, and just keeping a good portion of their reserves in bitcoin. If that's the case, they'll be solvent as long as the price of bitcoin doesn't collapse (big if) - in fact, they would have made a fortune over the last couple of months.

[eigenvalue]

This seems like the most likely explanation to me. It's a classic "Heads I win, Tails you lose" calculation, but with much better odds and payoffs than usual! If you are bullish on BTC as I am, this will turn out to be fine for everyone.