BTC goes up and down for a multitude for reasons. For example, Matt Damon going on tv makes BTC go up. You have an extremely simplistic view of the markets if you believe the only reason for BTC to go up is "Tether money printer goes brrrr". Yes, it's one of the reasons. It's not the only one.
> If/when BTC does go up you can simply short again at the higher level.
If you actually tried to put this proposal in an excel and model the returns, you would immediately notice that "short BTC" and "short USDT" have completely different outcomes and "simply short again" is not a remedy that fixes this issue.
You can model the expected value of all kinds of bets without knowing what the exact outcomes will be.
> if you believe [that Tether has solid reserves] ...
No, I don't believe that. Tether is a pile of burning garbage on a train wreck that's happening in slow motion over multiple years. Don't assume that I must be a Tether bull just because I disagreed with you on some related point.
> The reason people are attracted to this short is because they believe it is in fact the latter scenario, and that eventually some event (or series of events) will reveal the emperor has no (or at least not enough) clothes and the peg will collapse. My point is if/when it does it's going to take everything else down with it [...]
I understood your point the first time you explained it, and I already explained to you why you are wrong. Yes, if Tether collapses, everything else will crash as well. That's not the point of contention here. The point of contention is whether shorting Tether has the same expected value and risk as shorting BTC. It doesn't, because the risk that Tether goes up from $1.00 to $2.00 is practically non-existant, whereas the risk that BTC doubles in price is considerable. If you make any kind of simple EV calculations (with any assumptions you want!) you will immediately see that these bets are quite different in nature.