People do hold USDT. I hold some myself. If you are going to buy crypto again it saves the hassle and expense of converting into fiat money and back again.
The majority of exchanges can't actually hold fiat money due to regulatory issues.
Also I imagine some people are hoping to avoid the taxman by keeping it in crypto though that's legally not kosher.
Why USDT and not USDC or DAI? Don't you feel like holding USDT makes you complicit in whatever shit is going on?
Also, I would be very, very weary of using an centralized exchange that "can not hold fiat". With the layer-2 projects that are coming now (take a look at loopring or Stakenet), you can transact as much as you want, no gas fees and exchange fees are about the same as any CEX.
I somewhat agree, but it's also a chicken and the egg problem - everyone uses USDT as the primary pair because everyone wants it, and everyone wants it because that's what every other exchange offers. Exchanges can offer another stablecoin, but it's likely to have very little volume.
Ironically Tether, whose quantity appears to be determined by however much the small private entity that runs it decides to create, appears to be a much purer example of 'fiat' currency than most national currencies have been for most of the last half century (quantity determined in a decentralised manner by the balance of supply and demand for credit at a base interest rate a centralised body periodically updates to hit a [decentralised market-driven] fixed target rate of inflation)
It is meaningful, because a large part of crypto culture seems to be based around hand-waving and selling you an underdog no-big-government empower-the-people story
The not government issued bit would become pretty meaningful if they get shut down or collapse. They are more like IOU notes for fiat currency - Tether owes you one US$.
