Episode Summary
Executive Summary: The episode begins with host Jason Calacanis announcing an investigation into Tether, a stablecoin with red flags reminiscent of past scams like Madoff and Theranos, including opaque reserves, lack of audits, and ties to shady exchanges. The second half features a roundtable with founders of alternative asset platforms—Rally Rd (collectibles), Masterworks (art), and Fundrise (real estate)—discussing their explosive growth during the pandemic, asset appreciation, business models, and the irrelevance of blockchain for their regulated securities. The conversation highlights the democratization of alternative investments and the potential for a Tether-driven black swan event.
Main Topics: Tether Investigation and Fraud Indicators (Priority: 5/5): Jason Calacanis outlines the Tether stablecoin's red flags: $63B market cap, 581% growth in 2020-2021, 50% reserves in opaque commercial paper, only 2.9% cash, and a history of commingling funds with Bitfinex. He compares it to past scams and calls for a crowdsourced investigation. Alternative Asset Platforms' Growth During Pandemic (Priority: 5/5): Founders of Rally Rd, Masterworks, and Fundrise report triple-digit growth due to low interest rates, stimulus, and retail investor interest in tangible assets. Rally Rd has done 300 offerings, Masterworks is buying $400M in art annually, and Fundrise is acquiring $100M in real estate weekly. Asset Appreciation and Inflation Impact (Priority: 4/5): Discussion on how inflation and money printing are driving up prices in collectibles (sports cards up 40% in months), art (Banksy market doubled), and real estate (Austin rent growth 14% in 60 days). Entry price matters, and platforms focus on high-quality assets. Business Models and Revenue Structures (Priority: 4/5): Rally Rd charges no management fee or carry but earns from origination and merchandise sales. Masterworks charges 1.5% annual management fee and 20% carry. Fundrise uses a diversified pool model with low fees. All platforms align incentives by co-investing. Future Scalability and Market Penetration (Priority: 3/5): Founders see massive growth potential: Masterworks aims to offer diversified art funds, Rally Rd focuses on secondary market liquidity, and Fundrise expects to become the third-largest real estate investor within years. Current user bases (170k-300k) are small relative to stock market participation. Critique of Blockchain and NFTs for Traditional Assets (Priority: 3/5): All three founders and Jason agree that blockchain adds no value for regulated securities like art, real estate, or collectibles. They cite lack of insurance, copyright issues, and complexity. NFTs are seen as a separate asset class, not a solution for existing platforms.
Key Arguments: Tether's rapid growth and opaque reserves (50% commercial paper, 2.9% cash) mirror past frauds; the New York AG found it lied about being fully backed. Alternative assets are booming because of low interest rates, stimulus, and retail investors seeking inflation hedges and emotional returns. Platforms like Rally Rd, Masterworks, and Fundrise are democratizing access to previously illiquid assets, but entry prices are rising due to inflation. Blockchain and NFTs are irrelevant for these platforms because they already provide regulated, insured, and user-friendly digital securities; copyright law prevents NFT monetization of owned artworks. A Tether collapse could trigger a black swan event in crypto, similar to Madoff's exposure during the 2008 financial crisis. Real estate benefits from negative real interest rates (borrowing at 1.75% with 5% CPI), making leverage highly profitable.
Data Points: Tether market cap: $63 billion - Third highest in crypto, with 581% year-on-year growth from 2020 to 2021. Tether reserves composition: 50% commercial paper, 2.9% cash - From May 2021 disclosure; JPMorgan noted reputational risk concerns. Rally Rd offerings: 300 initial offerings - Across 15 asset classes over 3 years; 300,000 members. Masterworks AUM and annual purchases: $175 million AUM, buying $400 million/year - 60+ paintings; 170,000 investors; largest art buyer. Fundrise weekly real estate purchases: $100 million per week - 20th largest real estate investor globally; 170,000 active investors. Austin rent growth: 14% in 60 days - Attributed to remote work and migration to Sun Belt. Banksy market appreciation: Over 100% in one year - From 13% historical return to doubling; driven by crypto buyers.
Pivotal Quotes: "Tether's claims that it's a virtual currency that was fully backed by U.S. dollars at all times. With a lie." — New York Attorney General Letitia James: Quoted by Jason Calacanis during the Tether investigation segment, highlighting the official finding of fraud. "We're probably the largest buyer [of art] at this point." — Scott Lynn: During the roundtable, discussing Masterworks' scale in the art market. "What's the problem blockchain is trying to solve? That's the thing I'm trying to understand." — Jason Calacanis: In the roundtable, challenging the crypto community to justify blockchain for alternative assets.
Implications: Tether's potential collapse could trigger a crypto contagion, while alternative asset platforms are poised for continued growth as retail investors seek inflation hedges. The roundtable's unified rejection of blockchain suggests that tokenization of real-world assets remains a niche, not a revolution. Listeners should monitor Tether's reserves and consider diversifying into regulated alternative assets.
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.