You're talking about people who have already exited BTC - that's why they are holding USDT.
People flock to stables/fiat when uncertainty/risk increases, yes? So you have a bunch of people ($70b worth) who are currently in USDT. Then you have to account for all the people currently in crypto who would sell into stables/fiat in a black swan event.
What's the argument against this? You say that the argument is not well founded. Ok, fine. I've outlined my argument. What's the counter? What's the line of thinking where USDT holders en masse flock back into crypto when the safe haven that they already wanted to be in implodes?
They also may cash out to another fiat currency, no? I also am not sure I agree that they would all even cash out to fiat. I was asking what are the guarantees that they would cash out to USD, considering that why they may be holding USDT in the first place is to avoid US regulation? Something else to consider is that Tether is also more popular outside of the US. I'm just saying that I think it's an assumption that they all would cash out. It likely depends on how crypto as a whole is doing at that point, and I also think it's an assumption that crypto won't survive Tether's crash. There may be short term drops which lead to these assumptions being true, but really, no one knows for sure.
Especially on short notice, with Tethers sitting on an exchange that may not have access to fiat, they will likely sell to BTC or ETH at least at first.
Yes, but the best way to sell USDT is via crypto legs: buy BTC/USDT and sell BTC/USD - the net result of this is selling USDT/USD. The actual USDT/USD markets just aren't real/deep enough.
So the price in USDT terms skyrockets and the price in USD terms craters.
I'm just wondering, now that they have USD, after selling BTC, what do you think they are they going to do with the USD? It's not like they can extract easily USD from Binance or KuCoin (two of the most popular asian crypto exchanges, where USDT is also the most popular). As I alluded to in a comment above, the reason they are using USDT in the first place is because they can't deal with USD (or fiat) easily. So do they go into some other stablecoin, or keep it in BTC (or ETH), and try to move that to another exchange which is better suited as a fiat gateway? What if this other exchange is a heavily KYC'd exchange that they don't have access to in their jurisdiction, or that it would take a long time to get access to, even if it is available in their jurisdiction? There's also fiat withdrawal limits to consider, which are generally lower than crypto withdrawal limits. Also, to even be able to withdrawal fiat, instead of crypto, requires even higher levels of KYC, more processing time, no guarantee that they will be approved, etc. So, what do you think they will do then? This is also what TimeBearingDown was referring to in a sibling thread.