To the best of my understanding, tether does not need to have the exact amount fiat needed to back up all the issued crypto. It only needs sufficient amount to keep the system running. I don't think every person who holds fiat would require them immediately. It's almost synonymous to the banks who tends to hold a whole lot of customers deposit, but they only need enough cash to keep customers satisfied and invest some of customers deposit in zero or low risk venture, they even give out loans to other customers but always ensure that they keep the needed fund that may be required by customers.