For stocks I agree, but here tether isn't ever going to go much above $1, right? So the downside of shorting is just that it ties up a lot of capital, right?
Counter-party risk is the issue. The only places you might be able to short for real dollars will require you post up collateral for your short. Then once the wheels fall off they'll declare bankruptcy and keep your collateral.
'declare bankruptcy' is optimistic. More likely is that they disappear completely/fake their own death in a weird jurisdiction/get killed by gangsters/go to prison for child porn, etc.
That means you’ll still be paying interest for whatever period you’re holding the position, which really isn’t that bad depending on the rates. However, not to detract from the thread I would think other concerns like market irrationality and delisting still applies.
Not just at settlement, if one of the index exchanges goes insolvent and the price of BTC goes parabolic, it may push your short position past your brokers assigned personal risk tolerance for your account and they'll liquidate you. You'll be right, but broke.