Tether Financial Analysis: Needs an Additional $4.5 Billion in Reserves to

Original Author: Luca Prosperi

Original Compilation: Deep Tide TechFlow

When I graduated from university and applied for my first management consulting job, I did what many ambitious yet timid male graduates often do: I chose a company that specialized in serving financial institutions.

In 2006, the banking industry was a symbol of “cool.” Banks were typically located in the most magnificent buildings in the prettiest neighborhoods of Western Europe, and at that time, I was eager to take the opportunity to travel. However, no one told me that this job came with a more hidden and complex condition: I would be “married” to one of the largest yet most specialized industries in the world—banking—and it would be for an indefinite period. The demand for banking experts has never disappeared. During economic expansions, banks become more creative, needing capital; during economic contractions, banks need to restructure, and they still need capital. I tried to escape this vortex, but like any symbiotic relationship, getting out is much harder than it seems.

The public generally assumes that bankers understand banking well. This is a reasonable assumption, but it is incorrect. Bankers often categorize themselves into “silos” of industry and product. A banker in the telecommunications sector may know everything about telecom companies (and their financing characteristics) but know very little about banking itself. Those who dedicate their lives to serving banks (i.e., the “bankers’ bankers,” or the Financial Institutions Group (FIG) crowd) are a peculiar existence and are generally not well-liked. They are the “losers among losers.”

Every investment banker dreams of escaping the banking industry in the middle of the night while modifying spreadsheets, turning to private equity or entrepreneurship. But FIG bankers are different. Their fate has long been sealed. Trapped in a gilded “slavery,” they live in a self-contained industry that is almost ignored by others. Banking for banks is deeply philosophical and occasionally exhibits a certain aesthetic, but most of the time it remains invisible—until the advent of decentralized finance (DeFi).

DeFi made lending fashionable, and suddenly, every marketing genius in fintech companies felt qualified to comment on topics they barely understood. Thus, the ancient and serious discipline of “banking for banks” resurfaced. If you arrive in the DeFi or crypto industry with a box full of brilliant ideas about reshaping finance and understanding balance sheets, know that in a corner of Canary Wharf in London, Wall Street, or Basel, an anonymous FIG analyst may have thought of these ideas twenty years ago.

I was once a tortured “banker’s banker.” And this article serves as my revenge.

It has been two and a half years since I last wrote about the most mysterious topic in the crypto space—the balance sheet of Tether.

Few things capture the imagination of industry insiders like the financial reserves of $USDT….