They just printed another 100 mill, because what is that between friends? That would be ironic if fake internet money would bring down the cryptos. http://omnichest.info/lookupadd.aspx?address=3MbYQMMmSkC3AgWkj9FMo5LsPTW1zBTwXL Anyhow, here is a possible explanation from Reddit: The main problem is not that Tether will become worthless. The main problem is that they've used this fake money to drive up prices of BTC and alt coins. This is what is ultimately sustaining current price levels. It's simple supply and demand economics. What appears to have happened is that when the price was falling from a peak (because there was no demand at a given price, say $10K), Tether printed a bunch of a money, sent that to Bitfinex, and bought up a ton of BTC, and the price goes up to say $14K. Essentially, USDT served as fake demand for BTC, driving up the price. They keep printing, keep buying, and the price goes up. Now, when USDT is considered worthless, you might think that "well I'm fine, I don't hold USDT, I'll just go sell my BTC for the peak price of $14K." But wait, who was paying $14K for that BTC before? Oh right, it was a Bitfinex/Tether management and maybe some of us who FOMO bought on the way up. However, the >$1billion in demand you thought existed for BTC at $14K didn't ever really exist. So now, in order to sell your BTC, you need to lower your price....and lower it again...until you find a buyer.
I do feel transparency on this "dollar backed" coin needs to occur. I don't know, disclosure of amount in escrow in a weekly/monthly basis or something. If they're artificially raising the price and gdax is following that perception (as opposed to coinbase demand), then yeah, it's a huge problem.
Miners sell for USD. With higher price, USD would get drained at a faster rate. At some point, there will not be any USD left in the system, so we would hear about exchanges withdrawal issues. This is how MtGox went down. So far there is no such claim and the whole USDT thing has been going on for months.