Have to dig into this more, but yes, it's true that Tether has been accused of being insolvent. Tether is in litigation with the state of NY over these claims, and that litigation has been going on a long time (years). Tether maintains they are operating above board.
Tether has a $62 billion market cap right now, as I type, and is the #3 "crypto" after Bitcoin and Ethereum. I use quotes as I really don't consider stable coins as true crypto, as it's just a representation of the dollars that free market crypto should be competing against.
That market cap makes it possess about 6% of the market cap of Bitcoin and Ethereum combined, which is minimal. On the other hand, right now the 24 hour trading volume of Tether is about the same, $56 billion worth, as Bitcoin and Ethereum combined, or about 3.4% of the entire crypto market cap.
But one reason why people make use of Tether isn't so much because they want dollars, but because some exchanges offer trading of any crypto vs Tether, which they don't do so much between cryptos directly. For example, if you want to trade Ethereum for Litecoin, an exchange may not offer that trade directly in which case to do the trade, you would need to first trade Ethereum for something else, like Tether, and then trade that Tether for Litecoin. You'd need to choose an intermediary "hub" coin to get from one coin to another. THAT kind of trading is not something that lends any kind of importance to Tether as USD coin or even bitcoin could also serve as that intermediary. (Most exchanges do offer the ability to trade any crypto with bitcoin). If Tether were to crash over night, people would just use something else, even bitcoin, and the market would be unaffected. That could well be where much of that $56 billion trade volume comes from. The inhibition of using BTC as an intermediary coin in such cases is 97% psychological, as the crowds of even people who trade crypto are just hung up on "dollars".
This dollar thinking is also why many traders use Tether as a longer term hold. They would buy bitcoin or Ethereum when the dollar price is low, then when Bitcoin/Ethereum goes up in dollar terms, they sell back into Tether and hold it until prices go down, and then buy it back. Those types are really milking the crypto market making it more expensive for new investors and I for one would say good riddance for those who'd get burned in a Tether crash.
But certainly, the fundamental problem described in the vid is that we have a centralized crypto, Tether, providing liquidity to trade decentralized trustless cryptos like Bitcoin and Ethereum. In that sense, Tether can be considered a contaminating element in the market bringing the hazards of centralized fiat that bitcoin and all other free market cryptos were created to get away from. Everything this guy says about Tether can apply equally well to the Fed Reserve and conventional banks, as he freely acknowledges.
But also, Tether is not the only "stable coin" out there. If Tether were to fall, people who want a stable coin would flock to another stable coin. "USD Coin" is another stable coin, currently #8 in market cap with a $22 billion dollar value, about 1/3rd of Tether's MC share, but with only 2% of Tether's trade volume. USD coin would quickly replace Tether in a market crash of Tether, albeit with caution as people would be skeptical of any stable coin after getting burned on Tether.
Certainly a Tether crash would result in a big sell off of the broader crypto market, though what a panic sell off would require is something else for these sellers to sell their crypto for. If not Tether, then what? The possibility should also be considered that a crash of centralized Tether would be viewed as an affirmation of why decentralized crypto is valuable and dollar based centralized stable coins are dangerous. It would be a big debate issue in the crypto world, and an educational one at that. There's no doubt in my mind that a crypto market sell off due to a Tether collapse would be viewed by a great many people as a huge buying opportunity and that that would go a long way to mitigating a resulting general sell off of crypto. Price would come down though by a lot, however temporarily.