My question is what is that reference index? Tether is so large that the reference can’t be any of the big established crypto exchanges because they might be incentivized to “halt trading” to let the market “stabilize” rather than actually let it breakdown.
If there was a run on tether and exchanges shut down trading, I cannot imagine that making the situation any better. Traders would just move off exchange to some place where there's actual liquidity. Moreover, traders would never use that exchange again. Halting would do nothing like it does in traditional markets. In crypto, price discovery cannot be stopped.
In regards to those pairs being used as reference prices, there's no chance they freeze prices just to stabilize the derivatives. Open interest on tether is only $328m on $73b Tether outstanding
