May 3rd - This Week in Alternative Investments

Author

Adam Katz
May 03, 2024

This issue is brought to you by Augment, where you can take control of your private market investing


Headlines

  • The Fed kept rates steady

  • Florida real estate in trouble

  • A new record for a Magic card

  • Private credit cools down

  • Bitcoin is struggling


Plus: CZ gets sentenced, Harry Potter cover art, Housing prices are up, and much more.

Performance

Bitcoin
$59,119 (-7.5% weekly)
Card Ladder 50
13,789 (-0.8% weekly)
Thomson-Reuters VC Index
16,005.17 (-1.3% weekly)

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Market Updates

(CNBC)

The Federal Reserve made no changes to its benchmark interest rate. This was a widely expected move as recent reports showed higher than expected inflation rates well above the Fed’s 2% target. Fed chair Jerome Powell said, “[i]nflation is still too high,” but did indicate that a further rate hike was “unlikely.” At the beginning of the year, most economists predicted that there would be a rate cut at the May meeting and three rate cuts overall in 2024. Now, only one rate cut is forecasted and that may not come until November, if at all. For now, investors in many alternative asset classes will have to stay patient as high interest rates tend to keep people from taking more risk, leaving many markets at a standstill.

The Florida real estate market could be significantly overvalued. A study released by Florida Atlantic and Florida International Universities found that a typical home in Florida is 34.7% higher than its long-term pricing trend. This comes despite rising mortgage rates, slowing rent growth and a difficult home insurance market. While the study’s author does not expect prices to come down, there could be a long period of stagnation in prices on the horizon. Meanwhile, the number of homes for sale in the state has skyrocketed, and the amount of time homes spend on the market has more than doubled in the past two years.

(CGC)

A Magic: The Gathering card sold for $3 million, a new record. A rare “Alpha Black Lotus” card graded Pristine 10 by grading company CGC changed hands in a private sale. The card is the only one to ever achieve that grade from CGC, and one of only two graded 10 across all grading services. The previous record was achieved last year when rapper Post Malone bought a Lord of the Rings themed 1/1 card for $2 million. There is some speculation that the sale is just an effort to drum up publicity for CGC and inflate the overall market, which is why generally private sales are less reliable than auction sales when determining market value.

Fundraising for private credit hit a 4-year low. The total amount raised in Q1 was $30.6 billion, which is 14% below the average first quarter since 2017, and the lowest for any quarter since 2020. High inflation and high interest rates, along with the “higher for longer” attitude the Fed is taking are combining to slow the private credit market. Though higher interest rates do mean higher potential returns, it also could mean higher default rates as borrowers cannot easily refinance outstanding debt.

Event

How Small Investors get into Big Deals

Vincent CEO Eric Cantor spoke with Republic's Kendrick Nguyen, Everywhere Ventures' Jenny Fielding, and Alumni Ventures' Laura Rippy about how everyday investors can gain exposure to Venture Capital and the opportunities and pitfalls.

Explore

(The Block)

📝 Top Stories

  • Record Bitcoin outflows: With over $563 million of total net outflows on Wednesday, U.S. Bitcoin spot ETFs set a new daily record, and BlackRock’s ETF saw its first negative day so far, as Bitcoin’s price dropped 7.5% in the past week.

  • Anthropic’s new mobile app: The OpenAI competitor released the “Claude” app for iOS, a major step forward for the company that has received billions in funding from Amazon.

  • Don’t sell human skulls: A British auction house withdrew 18 ancient Egyptian skulls that they had listed for sale, which somehow is not already against the law.

  • Or bet on people dying: Alternative asset manager Apollo Global Management is being accused of getting a little too alternative and investing in stranger-originated life insurance policies - essentially wagering on when people would die.

  • Booze on the blockchain: Baxus, a web3 marketplace for collectible wine and spirits, raised a $5 million seed round, as they try to bring transparency and liquidity to the luxury market.

**Sponsored link

 🎨 Art

(Sotheby’s)

  • Harry Potter cover art: The original illustration for ‘Harry Potter and the Philosopher’s Stone’ cover is coming to auction and is expected to fetch $600,000, up from $106,000 in 2001, and could set a record for Harry Potter-related memorabilia.

  • Christie’s spring auction preview: A look at what is coming to the block in May, including paintings by Van Gogh, Warhol and Basquiat all expected to fetch $30 million or more.

  • NFL draft art for sale: Twenty giant sculptures of football cleats that were displayed around Detroit during last week’s NFL draft are now up for auction, with all funds going to charity.

⚾ Collectibles

(Henry Aldridge & Son LTD)

  • A Titanic sale: A gold pocket watch found on the body of John Jacob Astor IV, the richest passenger on the Titanic, sold for $1.48 million, setting a record for the most expensive piece of memorabilia from the ship.

  • Al Capone’s gun: The notorious gangster’s “sweetheart” gun will be auctioned on May 18, and carries an estimate of $2 million - $3 million, just three years after it sold for a little over $1 million.

  • Whiskey investing tips: Editor-in-chief of The Whiskey Wash Mark Littler’s five tips for investing in whiskey in 2024, including quality over quantity and being patient.

🪙 Crypto

  • CZ Zhao gets sentenced: The founder and former CEO of Binance will serve four months in prison after pleading guilty to money laundering charges, considerably less than the 36 months that prosecutors had sought.

  • Restaking is coming to Solana: At least six firms are trying to build restaking services for Solana, trying to mirror EigenLayer’s success on the Ethereum blockchain. Restaking is the process of taking a proof-of-stake coin that has already been staked on the blockchain and using it to also secure other protocols, effectively allowing less developed protocols to have the same security as the overall blockchain.

  • Crypto VC investing is up: After two straight down quarters, Q1 of 2024 saw $2.5 billion investing in crypto startups, though that still represents a decline from Q1 2023.

💵 Private Credit

  • Private credit gets tokenized: Untangled finance launched a $6 million USDC private credit pool on the CELO network that is open to accredited investors, as the on-chain private credit market grows.

  • Direct lending leads the way: A Preqin study found that direct lending funds, who loan money straight to borrowers, had the highest IRR of private credit funds over the past five years.

🏡 Real Estate

  • FHFA House Price Index rises: After a slight decline in January, the FHFA House Price Index rose by 1.2%, and is up by 7.0% year-over-year. All nine census divisions saw positive appreciation, both monthly and yearly.

  • So does the Case-Shiller index: The S&P CoreLogic Case-Shiller national home price index rose by 0.6% in February and 6.4% year-over-year. Of the top twenty metro areas, San Diego, Chicago and Detroit were the three biggest gainers, with Portland bringing up the rear.

  • Big Apple, Big Rents: While Zumper’s national rent index for April saw rents for one-bedrooms fall by 0.6% and two-bedrooms rise by just 0.1%, rents in New York City rose by 1.9% and 6%, respectively, and are up 19.9% and 26% year-over-year.

  • Yardi buys WeWork: The property management software provider is becoming the majority owner of the beleaguered co-working company as part of a $450 million restructuring deal that notably does not feature founder Adam Neumann.

🚀 Venture Capital

  • Island’s big raise: The maker of secure internet browsers for businesses raised $175 million at a $3 billion valuation, doubling its $1.5 billion valuation from last year.

  • CoStar acquires Matterport: The commercial real estate giant paid a 212% premium to acquire the 3D imaging platform, which is already used by portfolio companies Apartments.com, Homes.com and Loopnet.

  • Private equity’s absence from IPOs: As the IPO market has heated up in 2024, there have still only been 2 private-equity backed IPOs above $100 million, a sharp decline from 110 such offerings in 2021.

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