So, what's the mechanism there? You've got a smartcontract that robotically executes its code, and USDC collateral that lives on it and derives its value from US Govt Treasurys and some level of conventional-market oversight.
How does "loss of confidence" translate into the smartcontract no longer working, and the USDC not being redeemable for anything of value? Those are completely orthogonal dynamics.
The entire argument is based on this magic thinking of "it will all go up in flames at the same time for the same reason because it's all correlated, man".
If confidence collapses, tether will collapse and the rest of these ‘defi’ platforms will turn out not to be as decentralised as they thought, as they also depend on the confidence game.