Podcast Summary
Expert Insights on Alternative Assets and Potential Risks: Experts discuss the growth of alternative assets, potential risks, and ongoing debate about asset bubbles. Stay informed and do thorough research to avoid scams and make informed investment decisions.
The alternative asset space, including cryptocurrency, real estate, art, and more, has seen significant growth in recent years, and our industry experts, Rallyroads, Mark, Masterwork's Scott Lin, and Fundrise's Ben Miller, are at the forefront of these trends. However, with this growth comes potential risks, and there's ongoing debate about whether we're in another asset bubble. The host, Jake, shares his concerns about Tether, a stablecoin, and is launching a crowd-sourced investigation to determine if it's a scam or not. The discussion also touches on past industry scams, such as Theranos and Bernie Madoff, and the importance of staying informed and doing thorough research. Overall, the roundtable provides valuable insights into the alternative asset space and the importance of staying vigilant in the face of potential risks.
Stablecoins like Tether offer a stable alternative to volatile cryptocurrencies: Despite claims of being backed by USD, concerns over regulation, money laundering, and transparency persist in the stablecoin industry, making it crucial for investors to exercise caution and do thorough research before investing.
Stablecoins like Tether are becoming increasingly popular among crypto exchanges, particularly those that don't have access to traditional banking systems. Tether claims every coin represents one US dollar and is backed by an equivalent amount in USD, making it a stable alternative to volatile cryptocurrencies like Bitcoin. However, the industry is largely unregulated, leading to concerns about money laundering, dark pools of capital, and lack of transparency. Tether's market cap has grown significantly in recent months, reaching over $60 billion, but there are questions about whether it has the required $60 billion in USD reserves to back up its coins. The opaque nature of the industry makes it difficult to verify these claims, highlighting the need for greater regulation and transparency. Ultimately, while stablecoins offer a more stable alternative to volatile cryptocurrencies, investors should proceed with caution and do their due diligence before investing.
Bitfinex and Tether under investigation for co-mingling funds: Bitfinex and Tether, under investigation for co-mingling funds, reportedly placed over $1bn with a Panamanian banking platform. However, the platform lost or stole 850m of Bitfinex's money, leading to a lawsuit and concerns about potential fraud or Ponzi schemes.
Bitfinex and Tether, two entities in the cryptocurrency market, were under investigation by the New York Attorney General since 2019 for allegedly co-mingling funds and covering up losses worth over $850 million. The parent company of Bitfinex and Tether, iFinex, reportedly placed over $1 billion with Crypto Capital, a Panama-based fiat banking platform, due to their inability to find a reputable bank to work with. However, Crypto Capital either lost or stole 850 million of Bitfinex's money, leading to the New York Attorney General's lawsuit against iFinex for blending client and corporate funds to hide the missing funds. This behavior is reminiscent of classic fraud and gambling schemes, where managers dip into clients' accounts for personal use. The latest controversy revolves around the transparency of Tether's quarterly reports, causing concerns about potential scams or Ponzi schemes. Despite the settlement with the New York Attorney General, there is still uncertainty surrounding Tether's financial practices. For entrepreneurs looking for reliable hardware and software solutions, Dell for Entrepreneurs offers free expedited delivery, exclusive offers, up to 6% back on rewards, and financing options for IT projects. With a dedicated startup IT advisor and a wide range of high-quality products like XPS laptops and tablets, Dell is a trusted partner for entrepreneurs seeking to increase productivity and build their businesses.
Tether's Significant Commercial Paper Holdings Raise Concerns of Opaque Financing: Tether, a top cryptocurrency stablecoin, holds large commercial paper reserves, increasing transparency concerns and echoing past frauds.
Tether, a cryptocurrency stablecoin, holds a significant amount of its reserves in commercial paper, making it the seventh largest holder globally. Commercial paper is an opaque form of short-term debt, and Tether's large holdings in this area have raised concerns due to its lack of transparency. This situation echoes the Bernie Madoff scandal, where consistent high returns and lack of transparency eventually led to the unraveling of the fraud. The potential for a market collapse or contagion event could reveal if Tether is a fraud or just shady, making it an important investigation for the crypto community. Join the TWI Startups investigation by following @Jason on Twitter and using the hashtag #tetherinvestigation.
Tether's Lack of Transparency and Potential Market Manipulation: Tether, a stablecoin company, faces accusations of printing infinite USDT, injecting it into crypto markets to pump prices, lack of audits, and questionable leadership backgrounds. The relationship with Bitfinex, a crypto exchange owned by the same parent company, adds to the skepticism.
Tether, a stablecoin company, has been under scrutiny for its lack of transparency and potential manipulation of cryptocurrency markets. The company has faced accusations of printing infinite amounts of worthless USDT and injecting it into Bitcoin, Ethereum, and other cryptocurrencies to pump prices. Tether's relationship with the crypto exchange Bitfinex, which is also owned by the same parent company, has raised red flags due to the secrecy surrounding the individuals involved. The lack of audits and the questionable backgrounds of Tether's leadership have added to the skepticism. The company's history dates back to 2012 when it was originally called Real Coin and was launched in 2014 by Brock Pierce, who has a controversial past. The complex organizational structure and past hacks of Bitfinex have also raised concerns. Overall, the lack of transparency and potential manipulation of cryptocurrency markets by Tether is a significant issue that requires further investigation.
Bitfinex Hack: Customers Absorb Losses through BFX Tokens: The Bitfinex hack led to significant customer losses, which were offset by BFX tokens. The situation remains uncertain, and it's unclear if this was a fraud or a black swan event. Meanwhile, LinkedIn Jobs helps small businesses recruit top talent, and alternative assets like art, real estate, and startups offer potential rewards beyond financial gains.
The Bitfinex hack resulted in significant losses that customers had to absorb through a 36% reduction in their assets. In return, customers received IOUs in the form of BFX tokens. The situation remains complex, and it's unclear if this is a fraud or a black swan event. Meanwhile, small business owners face the challenge of recruiting top talent, and LinkedIn Jobs offers a solution with its large global footprint and simple tools. On a different note, alternative assets, such as art, real estate, and startups, can offer non-financial rewards and may be worth considering for investors as traditional assets like stocks and bonds become overvalued.
Investing in Alternative Assets: Cars, Art, and Startups: Alternative investment platforms like Rally Road and Masterworks offer retail and accredited investors access to unique asset classes, providing diversification and potential high returns. These platforms have democratized access to previously exclusive investments.
Alternative investments, such as collectible assets like cars, art, and even startups, offer unique opportunities for investors beyond traditional stocks and bonds. Companies like Rally Road and Masterworks, which were discussed in this podcast episode, have made it possible for both retail and accredited investors to invest in these alternative assets. Rally Road, founded by Chris Bruno, has offered over 300 initial offerings across 15 asset classes in just over three years. Masterworks, led by Scott Lynn, focuses on blue chip artwork and has amassed over $175 million in assets under management, with plans to reach $400 million this year. These platforms provide access to investments that were previously only available to the wealthy, offering diversification and potential high returns. While the value of these assets can be substantial, with some paintings worth millions, the number of collectors adding such large sums to their collections annually is unknown. However, these platforms are likely among the top buyers in the market.
Real Estate Market Growth During Pandemic: Younger investors turned to real estate alternatives, leading to triple-digit growth for Fundrise, while increased attention and asset costs drove up demand and prices.
The real estate market, specifically private real estate investing through platforms like Fundrise, experienced significant growth during the pandemic. Younger investors were drawn to alternatives and sought net positive investments for their portfolios. The lack of other activities led to increased attention on real estate and other experiential investments. As a result, Fundrise saw triple-digit quarterly growth since the pandemic began. Additionally, the cost of assets, including those syndicated through Fundrise, has risen due to inflation and money printing. The use of reliable and affordable cloud computing solutions, like Linode, has become crucial for businesses looking to save on infrastructure costs and improve efficiency.
Growth in Alternative Investments: Sports Cards, Trading Cards, Sports Collectibles, Comic Books, and Rare Books: Rally Road, an alternative investment platform, experienced expansion in various collectible categories, providing investors shares to trade and exit based on syndicate consensus, with a strong secondary market and no fees.
Rally Road, an alternative investment platform, has seen significant growth in the categories of sports cards and trading cards, sports collectibles, comic books, and rare books over the past year. The platform allows investors to buy shares in these assets and make decisions to sell or exit them based on the consensus of the syndicate. The secondary market for these securities is robust, allowing for price discovery and the potential for keeping those who want the asset in the asset, even during an exit. Rally Road does not charge carry or management fees and invests in every deal, aligning itself with the community. The art market, specifically contemporary art, has shown consistent appreciation with low volatility over the last 25 years, making it an uncorrelated asset class. While understanding of art as an investment class is still in its early stages, Rally Road's research team is leading in the field and has published reports on the correlation between art and other asset classes.
Art Ventures sees surge in retail demand for art investment: Art Ventures, a platform for art investment, experiences a surge in retail demand, earns fees through equity in art pieces, allows trading, and encourages long-term holds. Real estate, particularly residential and single-family rentals, shows growth during pandemic despite initial challenges, leading to rent growth.
Art Ventures, a platform specializing in art investment, has seen a surge in demand from retail investors looking to explore the asset class. The platform earns its management fees by issuing itself equity in the art pieces, aligning its interests with its clients. Art Ventures also allows trading of shares on the platform, although it encourages long-term holds. Institutional investors have shown interest, but art is still not widely recognized as a strategic asset class by them. In real estate, Art Ventures experienced growth during the pandemic, particularly in residential and single-family rentals. Despite initial challenges, the sector has seen significant rent growth in recent times.
Market conditions causing inflation in housing and collectibles: Stay data-driven and deliberate in buying decisions for residential real estate and collectibles, focus on high-quality assets, and identify emerging asset classes to stay ahead of the curve.
The current market conditions are causing significant inflation in various sectors, including housing and collectible assets. This inflation is being driven by a combination of factors, including supply chain disruptions, high demand, and people moving back to cities. For those in the residential real estate market, particularly in high-growth areas like Austin, Nashville, and Dallas, it's essential to buy at the right price. Similarly, in the collectibles market, it's crucial to focus on high-quality assets that are less likely to experience significant price drops. The key is to be data-driven and deliberate in your buying decisions, and to stay ahead of the curve by identifying emerging asset classes. Additionally, the speaker mentioned they have recently identified a new vertical to go after, but they did not reveal what it is.
Investing in Intangible Collectibles: A New Frontier: Intangible collectibles like domain names, signed sports memorabilia, and art from unconventional artists offer unique investment opportunities with historical appreciation and cash flow potential. New investors, including those from the crypto community, are attracted to these assets, expanding their reach and revenue generation.
Intangible collectibles, specifically domain names and unique items like signed sports memorabilia or art from unconventional artists, are becoming exciting new investment opportunities. These assets have historically appreciated and produce cash flow, allowing investors to invest behind brands and companies in a unique way. For instance, Masterworks has seen success in the domain name space and has also monetized their collection through the sale of merchandise and second-order collectibles. One intriguing example is the Banksy market, which has more than doubled over the past year despite not being traditionally supported by the art world. New investors, such as those from the crypto community, have shown interest in Banksy's work, demonstrating the potential for these unconventional collectibles to attract a wider audience and generate revenue.
Investing in anonymous artists like Banksy offers unique opportunities: Investing in diverse emerging artists can lead to significant upside potential, while established artists offer predictable returns with low volatility.
Investing in anonymous artists, such as Banksy, presents unique opportunities due to the lack of institutional support and limited availability of their works. This can lead to significant upside potential when the establishment eventually recognizes their value. The art market, particularly for established artists, offers predictable returns with low volatility, but investors seeking higher growth may find value in less established artists and new art movements. For instance, Monet's market, though predictable, has lower returns compared to other top artists. By investing in a diverse range of emerging artists, investors could potentially reap substantial rewards. Masterworks, as a platform, provides valuable insights into the risks and potential returns of various artists, allowing investors to make informed decisions based on their risk tolerance and investment goals.
Innovative investing in art and real estate: The art industry introduces mutual funds for new artists, while real estate focuses on macro trends for investment opportunities. Institutions prefer later-stage investments, while developers capitalize on emerging markets and trends.
Both the art and real estate industries are exploring innovative approaches to investing in new and emerging assets. The art industry is introducing mutual fund-like products to diversify investments in new artists, while the real estate industry is focusing on macro trends like remote work and affordable living to identify investment opportunities. The money follows these trends, with institutions preferring to invest in later stages or established assets. Developers, on the other hand, are the trendsetters, identifying and capitalizing on emerging markets and trends. The art industry is moving towards a more accessible and diversified investment model, while the real estate industry is focusing on meeting the demands of changing demographics and work trends. Overall, both industries are adapting to meet the evolving needs of investors and consumers.
People, not developers, lead real estate investments: Real estate investments are led by people, not developers, and are sold as diversified pools to individual investors seeking stable returns. Alternative assets like art or collectibles have potential, but digital offerings and second-order collectibles show the most traction.
People, not developers, lead real estate investments, especially in markets like Austin and Nashville. These investments are often sold as diversified pools, similar to stocks, to individual investors seeking stable results. While there may be opportunities to make money from alternative assets like art or collectibles, traditional museum business models may not be financially viable. Instead, digital offerings and second-order collectibles have shown the most traction with investors. For instance, a Wayne Gretzky rookie card that was initially offered at $800,000 has since sold for over $3 million. Providing merchandise or experiences related to these investments can create additional value for investors.
Limited monetization opportunities for NFT owners: NFT ownership offers emotional connection and community engagement, but monetization is limited due to IP rights and licensing issues. Opportunities exist through original works, experiences, and real estate investments as hedges against inflation.
While owning an NFT gives you certain rights, such as community engagement and emotional connection, there are limitations to monetizing these assets due to intellectual property rights and licensing issues. However, opportunities for monetization exist through original works and experiences, like leasing domain names. Additionally, real estate, including NFTs, can serve as a hedge against inflation, making it an attractive investment despite potential market corrections. Ultimately, the success of NFT platforms relies on building a strong community and providing unique experiences, which can lead to significant growth and opportunities as the business scales.
Growth in Art Investment Market and Its Impact: The art investment market is expanding, with companies like Syndicate.com and Masterworks aiming to attract more capital and investors. This growth could lead to increased value for individual art pieces and artists' markets, managing transactions worth billions, and balancing the market through buying and selling.
The art investment market is experiencing significant growth, and companies in this space, like Syndicate.com and Masterworks, are aiming to expand their reach and impact by attracting more capital and investors. This growth could lead to an increase in the value of individual art pieces and artists' markets, making it an exciting opportunity for investors. If these companies were to grow tenfold, they could potentially manage transactions worth billions of dollars, making a substantial impact on the art market. Moreover, these companies are not just acquirers but also exiters of art, which could help balance the market as more capital comes in and assets are sold back to private owners. The secondary market is also a significant focus, with potential for substantial growth in transaction volume without necessarily increasing primary issuance exponentially. Overall, the art investment market is still in its early stages, and the potential for growth is significant.
Limited market penetration in alternative investments despite the rise of digital platforms: Millions of potential investors are not yet engaged in alternative investments through digital platforms, and the crypto community needs to demonstrate how their technology solves a unique problem in this asset class rather than assuming it's a one-size-fits-all solution.
While there are several platforms offering alternative investments in art and real estate, the market penetration is still relatively small, with millions of potential investors not yet engaged. For instance, Syndicate has 170,000 active investors, Masterworks has 100,000 members, Rally Road has 300,000 users, and Fundrise has not disclosed its exact number. However, the crypto community's idea of using blockchain and tokenization to simplify and secure these investments has not gained significant traction among sophisticated investors due to its complexity and lack of proven value. Instead, these platforms focus on providing regulated offerings with provenance and immutability through digital securities. The challenge for the crypto community is to demonstrate how their technology solves a problem specific to this asset class rather than assuming it's a one-size-fits-all solution.
Lack of Understanding and Value in Crypto for Alternative Assets Sector: Industry leaders in real estate, art, collectibles, and startups struggle to find practical use for crypto due to established systems and lack of clear value beyond hype.
Despite the massive investment in the crypto space by industry leaders, there is a lack of understanding and perceived value for the technology in the alternative assets sector. Developers and asset managers in real estate, art, collectibles, and startups expressed their inability to find a practical use for crypto, as they already have established systems for trading, databases, and custodianship. While some, like Chris, are intrigued by the potential of NFTs as a new collectible asset class, they also acknowledge the importance of maintaining underwriting standards and copyright ownership. Ultimately, the crypto community needs to provide clear value to consumers beyond the hype and religious belief in the technology.
Mickey Mouse Rule: Copyright Protection for 75 Years After Creator's Death: The Mickey Mouse rule extends copyright protection for an additional 75 years after the creator's death, encouraging continued creativity and income for artists' heirs but also hindering public access to cultural works and stifling innovation.
The Mickey Mouse rule, also known as the rule of the life of the author plus seventy years, is a copyright law that extends intellectual property protection for an additional 75 years after the death of the original creator. This rule was named after Disney, who famously lobbied to extend Mickey Mouse's copyright multiple times to keep the character in their ownership. Originally, copyright protection lasted for 50 years, but this rule was changed to encourage continued creativity and income for artists' heirs. This extension has been a subject of debate, with some arguing that it hinders public access to cultural works and stifles innovation. Overall, it's important to understand the implications of copyright laws and how they impact creators, consumers, and the broader cultural landscape.
