I've been looking into USDT a fair bit recently, and it really stinks. At this point I would be a bit surprised if it's not some kind of scam. A lot of the USDT deposits may be legit, but let's assume for a moment the worst case: USDT was created as a scam from the start, and has been slowly leeching BTC from USDT-supporting exchanges; almost none of the $600 million in USDT is from real deposits, but was printed from thin air. If we assume that hypothetical, then what would the effect on the Bitcoin price be?

I suppose that it would be a big negative force, but not as bad as some might fear. Although USDT-supporting exchanges have a lot of volume, I think that there's vastly more money on regulated exchanges like GDAX, and arbitrage between the two won't be possible if USDT is illusory. So maybe a 15-20% drop in price and recovery over several months, assuming a total instantaneous USDT collapse? Thoughts on this?

I also suppose that altcoins would be hit far harder, since they are almost exclusively traded on USDT-supporting exchanges.

I think that someone or some group has been trying to manipulate the BTC price by spamming these worries on various social media over the last couple of weeks, which has created some natural pushback against the idea. But that doesn't make the idea false. One speculative (IMO plausible) timeline for recent events is:

1. USDT is printed out of thin air over a long period of time, and there's grumbling about it constantly, but nobody really does anything.
2. Someone looking to affect the BTC price grasps onto the above issue and spams social media about it. Eg. "Check out what this one guy says will crash Bitcoin to $0.01, you won't believe what this company did!".
3. Due to the spam, a USDT bank run starts, but USDT runs out of actual money.
4. To buy time, USDT creates the "theft transaction" as an inside job. This creates an excellent and essentially irrefutable excuse for stopping further withdrawals.