The most likely scenario is that Tether is _overall_ solvent, though not in liquid assets.
What would likely happen in case of a bank run is:
1) Tether will defend the peg and redeem at $1
2) Tether will freeze redeems because of limited liquidity
3) Tether will fill face huge pressure and regulatory threats
4) Some people will want to exit USDT immediately at a discounted price (say $0.5), while some others will buy discounted USDT hoping once Tether solves its liquidity issues or bankrupt they could get more than $0.5 per USDT.
TLDR: USDT will most likely not go to $0 in case of default. Most likely there will be speculation on Tether's illiquid assets value that could be sold back to pay creditors.
The most likely scenario is that Tether is _overall_ solvent, though not in liquid assets.
What would likely happen in case of a bank run is:
1) Tether will defend the peg and redeem at $1
2) Tether will freeze redeems because of limited liquidity
3) Tether will fill face huge pressure and regulatory threats
4) Some people will want to exit USDT immediately at a discounted price (say $0.5), while some others will buy discounted USDT hoping once Tether solves its liquidity issues or bankrupt they could get more than $0.5 per USDT.
TLDR: USDT will most likely not go to $0 in case of default. Most likely there will be speculation on Tether's illiquid assets value that could be sold back to pay creditors.