Expect a massive cryptocurrency crash if Tether's regulatory downfall finally occurs; a majority of exchange trading pairs are between currencies and USDT. (not financial advice)
Or are you referring to unregulated futures on some crypto exchanges?
So why don't they? Why would literally anyone choose to hold USDT over any other stablecoin?
Is that actually true? In my (limited) experience I have seen ETH and USDC much more frequently than USDT.
There also seems to be a recent migration to algorithmic stablecoins like RAI which aren't pegged to the dollar but are (supposedly) designed to limit fluctuation in value. I suspect that without regulatory action against both USDC and decentralize stable tokens that crypto would recover from a Tether collapse.
I agree that prices would recover after a short term Tether-induced crash, and markets would almost certainly shift to DAI and similar decentralized stablecoins.
It would wash out a lot of the accumulated speculative value and hopefully lead to a much more confident regulatory framework for the interface between blockchain money and real world money. It would also long-term strengthen fully decentralized aspects of the crypto ecosystem while flushing out those that don't really function independently of traditional finance but instead accumulate speculative valuation based on an unsafe interface with fiat and the financial sector.
Winners all around (except for crypto speculators)?
Of course, this assumes Tether aren't lying about that too.
Small exchanges could also lose liquidity from bad code that assumes USDT will always equal $1.