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One major caveat; You're not shorting BTC/USD, you're shorting BTC/USDT. As long as Tether is managed by a shady, unregulated corporation with zero transparency or oversight, that has full freedom to create as much artificial liquidity as they see fit, that seems like a very bad bet.

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Most people don't know this but Tether and Bitfinex have the same parent company, iFinex. Bitfinex is easily the largest manipulator of BTC price and their wallet holds nearly 1% of the BTC supply.

Together, they practically control the market.

Even Bitcoin maxis agree that Tether's collateral is very risky. It's a house of cards waiting to collapse.

Why not short USDT directly then rather than throwing BTC into the mix?

The more I think about it, the more I think that this is actually a pretty genius trade. The price of Tether is effectively capped at 1 USD, so it's not like a short position could blow up in your face. All you'd stand to lose is the interest.

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