If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether.

Conceivably, a crisis with Tether could affect confidence in the entire cryptocurrency ecosystem, which would put downward pressure on the Bitcoin exchange rate.

It's not clear which of these factors would dominate, so it's not clear what would happen to exchange rates.

But currently Tethers trade 1:1 for USD on multiple exchanges, so markets aren't showing evidence of lost confidence.