Episode Summary
Executive Summary: The episode combines a breakdown of Terra/UST’s algorithmic stablecoin collapse with a broader “weighing” exercise on post-COVID tech stocks, arguing that fundamentals and cash now matter more than hype. Bennett Tomlin explains why Terra’s peg mechanism was structurally fragile, while Jason and Molly compare several crushed names—Coinbase, Shopify, Twilio, Zoom, Block, and Peloton—using cash, revenue, and runway to judge whether they’re undervalued or still too risky.
Main Topics: Terra/UST algorithmic stablecoin collapse (Priority: 5/5): Crypto skeptic Bennett Tomlin explains how Terra’s design tied UST’s dollar peg to Luna’s market value and why that structure can trigger a death spiral when confidence breaks. Stablecoin design and regulation (Priority: 5/5): The discussion contrasts fiat-backed stablecoins like USDC with algorithmic models, arguing that fiat-backed coins resemble bank-like deposits while algorithmic ones are inherently unstable and likely to attract regulation. Tech stock “weighing” and valuation reset (Priority: 5/5): Jason and Molly analyze deeply corrected public tech names by comparing market cap to cash, revenue, and profitability, arguing the market is returning to fundamentals. Company-by-company fundamental review (Priority: 4/5): Coinbase, Shopify, Twilio, Zoom, Block, and Peloton are reviewed through enterprise value, cash runway, sales growth, and profitability to identify which may be bargains and which are in trouble. Elon Musk/Twitter and Trump reinstatement news (Priority: 3/5): The hosts briefly detour into Elon Musk’s stated openness to reversing Trump’s ban, framing it as a major ideological signal about Twitter’s future direction and moderation stance. Broader market and societal panic (Priority: 3/5): The episode situates crypto and equity selloffs within a larger backdrop of inflation, war, Roe v. Wade, and post-pandemic anxiety, urging emotional balance and historical perspective.
Key Arguments: Algorithmic stablecoins rely on reflexive confidence rather than hard reserves, so once the peg breaks, redemption pressure can accelerate collapse. UST’s arbitrage mechanism only works if market participants still believe Luna will hold enough value to absorb redemptions. Terraform Labs and its ecosystem effectively subsidized growth with unsustainable yields, particularly Anchor’s ~20% return, which resembles a classic incentive-fueled blowup. Fiat-backed stablecoins like USDC, Binance USD, and Paxos appear more defensible because they are backed by reserves and fit better into existing banking regulation. Terra’s failure could damage trust in the entire algorithmic stablecoin category and invite regulators to scrutinize all stablecoins more aggressively. Market valuations of high-growth tech are reverting toward cash flow and balance-sheet reality after a speculative peak. Coinbase, Zoom, and Twilio may be attractive because their enterprise values are low relative to cash and revenue, while Peloton looks much riskier because of limited runway. Block is fundamentally stronger than some peers due to Cash App and merchant services, but the hosts are less certain about the strategic clarity of its pivot. Twitter’s potential reversal of Trump’s ban is interpreted as a political and cultural signal, not merely a moderation tweak.
Data Points: Anchor yield: 19.5% to 20% - Discussed as the unsustainable return used to attract Terra deposits. Terra market cap: $18 billion - Bennett says Terra reached this scale before the collapse. Luna market cap: $40 billion - Bennett says Luna’s market cap was in addition to Terra’s. Combined nominal value: ~$60 billion - Total nominal market cap of Terra plus Luna. Luna Foundation Guard reserves: $2B-$3B held from January until collapse; $10B was the target - Used to defend the peg via market operations. Bitcoin support deployment: $1.5B BTC loan + $1.5B UST loan - Used by Terraform Labs/LFG to stabilize UST during the run. UST peg level during collapse: ~$0.90, later under $0.70 on Binance - Shows the peg breaking and trading restrictions triggering. Luna private sale price: $0.18 to $0.80 per token - Early venture investors entered at very low prices. Luna peak price: ~$90 to $115 - Illustrates the extreme upside before the crash. Coinbase market cap: $16 billion - Used in the public-market valuation comparison. Coinbase cash and marketable securities: $7 billion - Subtracted from market cap to estimate enterprise value. Coinbase 2021 revenue: $7.8 billion - Used to argue the company trades near 1.1x EV/revenue. Shopify market cap: $42 billion - Used in the valuation review of beaten-down tech. Shopify cash: $7.7 billion - Balance-sheet strength after the selloff. Shopify 2021 revenue: $4.6 billion - Showed 57% growth year over year. Shopify 2021 net profit: $2.9 billion - Included a $2.9B unrealized investment gain. Shopify adjusted net income: $814 million - Core-business profit after adjustments. Twilio market cap: $17 billion - Evaluated as a potential bargain. Twilio cash: $5 billion - Provides about five years of runway at current losses. Twilio revenue: $2.8 billion - Used in price-to-sales discussion. Twilio net loss: $949 million - Shows the business is still unprofitable. Zoom market cap: $26 billion - Cited as a possible acquisition target for larger platforms. Zoom cash: $5 billion - Balance-sheet strength in the comparison. Zoom profit: $1 billion - Supports the thesis that Zoom remains financially strong. Block market cap: $48 billion - Formerly Square; considered one of the stronger names. Block cash: $5.2 billion - Balance-sheet support. Block 2021 revenue: $17.6 billion - Up 81% year over year. Block net income: $158 million - Shows profitability despite market concern. Peloton market cap: Under $4 billion - Returned to private-market levels after the collapse. Peloton cash and marketable securities: $1.5 billion - Used to estimate a short runway. Peloton Q3 revenue: $964 million - Down 24% year over year and 15% quarter over quarter. Peloton subscription revenue: $370 million - About 38% of total quarterly revenue. Peloton product revenue: $594 million - About 62% of total quarterly revenue. Peloton net loss: $757 million - Highlighted as the reason for urgent restructuring. Bitcoin price: ~$29,000 - Cited during the broader crypto selloff discussion. Twitter share price during debate: $47 - Used to argue the deal might deserve repricing lower.
Pivotal Quotes: "Algorithmic stable coins like Luna and Terra rely on a bit of alchemy almost, where I'm sorry, the word you used was alchemy." — Bennett Tomlin: Explaining why algorithmic stablecoins are structurally fragile. "Every time the peg breaks, it becomes a little bit harder to build up the confidence and faith in this thing again." — Bennett Tomlin: On why repeated depegs undermine recovery. "Weighing. We're doing some weighing. Yes. We're putting things on the scale and saying, does this make sense?" — Molly Wood / Jason Calacanis: Summarizing the show’s valuation approach to tech stocks.
Implications: The episode suggests the market is punishing hype and rewarding cash, margins, and runway. Terra’s collapse may accelerate stablecoin regulation, while beaten-down tech names could attract buyers if they trade below intrinsic value.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.