Yasutora "Chad" Sado is a quiet and rather enigmatic character in the BLEACH universe who mostly keeps to himself. One of the character's most important relationships is his friendship with series protagonist Ichigo Kurosaki, and while it does not get the most fleshed out development, his Mexican-Japanese heritage and otherness are particularly important aspects to his character. Making friends was never his forté, but now that he has established those kinds of relationships, Chad has proven to be immensely loyal and caring.
While it does get explained very early on in the series, the reasoning behind Yasutora's nickname in the series can escape non-Japanese fans of the series because of how it is derived from his actual name. Here's the run-down on why they call him "Chad".
Crossing Tea
In order to understand the logic behind the nickname, the character's name has to be broken apart. This also means that for this purpose, the character's name will be analysed in its original Japanese format; with the character's family name coming before their first name. Anyway, "Sado Yasutora" is written 「茶渡 泰虎」; with both names being written with two characters. The most important element when it comes to figuring out why the other BLEACH characters call him "Chad" lies solely in his family name, "Sado".
In Japanese, it is written with the kanji for "tea", pronounced "cha" on its own; followed by a kanji that can be read as "watari" on its own. In this context, the kanji is a kind of gerund, as it implies "delivery", as in, to "hand over", but as a kind of concept, rather than the action per sé. Anyway, in context, "Sado" refers to a traditional tea ceremony. The pronunciation of the kanji changes and can invoke pronunciations more closely based on the original pronunciation of the kanji as Chinese characters and this pronunciation change happens to both kanji. While the first character is often pronounced "cha"; which is how the word "chai" is derived (meaning "tea"), the reading in Chad's surname is based on the "Tō-on" (Tang Dynasty) reading of the character, which is where the first syllable comes from.
Ultimately, what happened for the BLEACH characters to turn "Sado" to "Chado" is effectively a common pun strategy employed in the names of various anime characters and concepts all across the medium: the deliberate misreading, thus mispronunciation in context, of Japanese characters. The first kanji, normally pronounced "cha" is reverted to this configuration, while the second kanji retains its pronunciation; possibly due to the fact that the change in pronunciation does not change the associated kanji. The reason for favouring this Tō-on pronunciation ahead of the three other ways the average kanji can be read is because now the name sounds like "Chado" which gets Romanized to just "Chad".
Relaxing Tiger
While seemingly unrelated to the development of his nickname, Chad's first name is important when it comes to his heritage, as well as his characterization in the series, and also deserves some attention. "Yasutora", like the character's family name, consists of two kanji, and is written 「泰虎」. The first of these is an interesting character for the number of different concepts it invokes, especially in relation to how Chad interacts with the rest of the BLEACH universe. 「泰」can generally be thought to invoke the concept of "peaceful" or of "calm", and is used in Japanese phrases like wakari yasui ("easy to understand"); however, if one takes it a little further, the kanji can sometimes be used to invoke concepts like "great", "excessive", or even "extensive".
Chad is introduced as a gentle, but really strong giant; however, it is revealed that a younger Chad used to struggle to control his anger, and would use his big fists and big body for violence. Living with his grandfather, Chad learned to use his big frame and immense strength for the sake of other people, and became someone who could stand in the face of an enemy and take all their attacks without retaliating or getting angry.
The second part is one familiar to many fans of BLEACH because it has been addressed several times in the series, once by the former Visored leader and current 5th Squad Captain, Shinji Hirako. The "-tora" part in Chad's name is written「虎」and it means "tiger". It can also be used to imply fierceness, but that's possibly due to the association of such a quality with the animal itself. All together, "Yasutora" is supposed to give rise to the character's most important quality: his gentleness, and slowness to anger despite his immense strength, size and constant provocation courtesy of the world around him.
Now, back to "Chad"; if one considers the English origin of the name, an interesting link between it and Yasutora can be found, beyond the mispronunciation of characters. "Chad" comes from the Old English "Ceadda", possibly derived from the Welsh "cad", meaning "battle", and the name is thought to mean "defender" or "protector", giving another layer to the friendship that developed between himself and Ichigo on the basis that both of their names invoke the idea of protection on some level.