In this scenario, if USDT drops low enough, might you not have trouble actually procuring enough USDT to payback and unlock your BTC? It would seem like a sudden collapse of USDT might cause a complete stop in all trading of USDT pairs, no? I suppose you could counteract that a bit by continuing to hold a certain amount of USDT, but would the loan instrument still accept USDT as repayment if USDT becomes worthless?
Presumably the value of Tether would drop much farther than the value of other crypto.
If USDT drops 90% and BTC drops 50% in USD terms, the BTC would gain value in USDT terms and your loan would be even more overcollateralized.
Then you could pay back your loan with USDT at ten cents on the dollar and make an absolute killing.