I think Market Cap = (value per asset) * (total # of assets in the market). So the Market Cap of USDT SHOULD BE roughly equal to the number of Tethers on the market (assuming the price of a single Tether is stable, which isn't a bad assumption right now).
Since "every Tether is backed 1:1 by USD" and Tether is (more-or-less) pegged 1:1 to USD, if you see the market cap drop by a significant margin, it's likely that the drop was an outflow to currency. If we check the Luna crash event (~early May - ~early June 2022), we can see that USDT lost ~18B in market cap over that period. So (I think) we can assume that there was (roughly) 18B of dollar outflow over that period.
If any of my statements here are incorrect, please correct me. I'm a software engineer, not a finance artist or an MBA, and the last business class I took was summer school in High School in like 2006.
Couldn’t Tether burn tokens it holds on its own or affiliates’ books to create that impression?
I don't know of any way to find how much USDT is held by the issuer of Tether (or their coparties) and how much is held by other wallets at any given time. I suspect that calculation would require a significantly greater knowledge of the blockchains that USDT is on than what I have.