[simonh]

Did you honestly believe they were 100% backed? If not, why would you assume Tether users believed it?

What matters is that when someone cashes out their Tether, as people do from time to time, that there is enough money there to do so. The risk is that there is a run on Tether and they exhaust their available funds.

So the degree to which a trader is willing to trust tether is based on their judgement as to whether such a run will happen and that they will end up at the tail end of it and be one of the ones that loses out. But traders make those sorts of calculations and take those sorts of risks all the time. Of course every now and then some of them lose.