Tether's backing / solvency become more important when it's a major provider of crypto liquidity.
If liquidity is generated by many participants, the failure of one doesn't impact the underlying asset.
If liquidity is concentrated in one participant, it increases the potential volatility of the asset, as that participant's failure can drastically limit liquidity and leave the asset open to bigger price swings.
That said, even at $1B, Tether is a smaller portion of the BTC market than it was historically.
Tether's backing / solvency become more important when it's a major provider of crypto liquidity.
If liquidity is generated by many participants, the failure of one doesn't impact the underlying asset.
If liquidity is concentrated in one participant, it increases the potential volatility of the asset, as that participant's failure can drastically limit liquidity and leave the asset open to bigger price swings.
That said, even at $1B, Tether is a smaller portion of the BTC market than it was historically.