So if Tether busts, you know what will happen? People will start to sell BTC and Alts for USDT and wait out the volatility... . I am 100% sure the majority will do this, because those smart enough, dont use Tether.
But the interesting part will be what is going to happen next, if they realize that not BTC is dropping, but their USDT to USD value.
I hope it wont be that big of a deal, as it potentially only removes about 2 Billion Dollars from the market, which isnt that much, if you look at the whole market. However if it takes Bitfinex with it down, that will be another story...