Well, it's possible "backed", in the sense that there are dollar-denominated assets backing it. They've already admitted that it's not actual dollars, and that some of them at least are foreign assets.
Which probably means it's Chinese dollar-denominated debt, perhaps stuff like Evergrande bonds that you could get for $0.05 on the dollar. So, it is "backed", perhaps, in that there are dollar denominated assets.
But, functionally, it's probably not backed in a way that does anyone any good. So your basic point is correct. At some point, people rush for the exits, and when they do, BTC may collapse with it.
A close friend of mine does banking in Nassau, Bahamas and works with Tether, and according to him Tether is where they sling all of their lowest rated junk chinese bonds.
He has been telling me to go nowhere near it for the last 5 years and I have not.
I have seen detailing, possibly on HN, a few years back of how tether's asset base was fabricated. The report used intra-day banking movements to show that it was fiscally impossible for tether to be backing their assets at the rate they were minting using the banks they claimed. The report further correlated tether minting to Bitcoin price action. It showed in fairly clear and granular detail how tether was used to pump and subsequently dump Bitcoin and other cryptos. This was back at least 3 years ago. The pump and dump works to allow tether to profit enough to actually get the assets though. And it works until it doesn't. USDT can support Bitcoin price long enough for the minters of tether to extract USD for what they minted as long as their are other buyers getting in.
It is a traditional ponzi scheme but with an additional layer that makes it far more resistant. It's essentially the same thing as government central banking but for crypto and without the threat of violence to control valuations.
Thanks for the reference. Although I'm not able to judge the validity of the report, looks like around half of Tether's assets (not necessarily half of their market cap) are held in dollar-denominated securities (T-bills and cash).
I believe Tether's claim is essentially "We can't tell you what dollar-denominated assets we're backed by, or get any competent auditors to sign off on our accounts, but the reserves are there. Trust us. Would a cryptocurrency company lie to you?"
Could be a piece of tissue paper with an IOU for a trillion dollars from Deadbeat Dan. Could be a deed to lovely waterfront property on the moon. Could be a controlling interest in Bitfinex. We don't know.
Which probably means it's Chinese dollar-denominated debt, perhaps stuff like Evergrande bonds that you could get for $0.05 on the dollar. So, it is "backed", perhaps, in that there are dollar denominated assets.
But, functionally, it's probably not backed in a way that does anyone any good. So your basic point is correct. At some point, people rush for the exits, and when they do, BTC may collapse with it.