I'm sure getting to tens of billions of USDT is more difficult, but in general, if borrow interest flows in, supply will chase it, as the supply rate automatically adjusts according to the ratio of the pool which is being borrowed.
More people borrowing drives up the supply rate, until more suppliers come in.
You can probably only get so much Tether into the protocols that way, maybe $5-10B
I didn't realize you were talking about shorts of larger size though. I think you'd have a hard time shorting, say, 20% of the supply of a stock also
The point being made is that no one can profit by shorting USDT to the point where they would be shown not to have anywhere close to the reserves they claim. So the argument "no one has successfully shorted USDT, so Tether must actually hold the needed reserves" is false.
This of course doesn't prove that they don't the reserves, it's just that this is a bad argument.
More people borrowing drives up the supply rate, until more suppliers come in.
You can probably only get so much Tether into the protocols that way, maybe $5-10B
I didn't realize you were talking about shorts of larger size though. I think you'd have a hard time shorting, say, 20% of the supply of a stock also