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Published May 18, 2022

Bonus Episode: Plunging Markets, Crypto Winters, and Elon’s Twitter Deal — with David Yermack

Scott Galloway and finance expert David Yermack dive into the tumultuous crypto market, inflation challenges reminiscent of the 1970s, and the intricate legal landscape of Elon Musk's unconventional Twitter acquisition, while advocating for strategic diversification in uncertain financial times.
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Episode Highlights

  • Crypto Dynamics

    provides insights into the current dynamics of the cryptocurrency market, highlighting its inherent volatility. He notes that while major cryptocurrencies like Bitcoin and Ethereum have seen significant declines, they remain more stable compared to smaller coins and NFTs, which can lose up to 90% of their value 1. Yermack emphasizes the importance of understanding the purpose and design of each cryptocurrency, as factors like legal challenges can heavily impact their value 2.

    The markets really have been dropping since November, so you've had a very gradual slide for about six months, and most assets are down more than 50%, sometimes a great deal more.

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    Despite the downturn, he remains optimistic about the long-term potential of decentralized finance projects 3.

       

    NFT Evolution

    The NFT market is experiencing a significant shift, moving beyond digital art to more practical applications. explains that while generative art NFTs like CryptoPunks and Bored Apes have seen a decline due to market saturation, the true value of NFTs lies in their ability to securely record ownership of diverse assets 2. He envisions NFTs replacing traditional property titles, offering a more robust and transparent system for asset ownership 4.

    The real value of NFTs is not for generative art, for bored apes and so forth. It's to fix ownership of assets that can be as diverse as real estate or old master paintings.

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    This evolution in the NFT space is expected to influence various industries, including real estate and sports 5.

       

    Stablecoin Issues

    Stablecoins, often compared to money market funds, face unique challenges in maintaining their value. describes how stablecoins are designed to hold a consistent value, typically pegged to the dollar, but can falter due to imbalances in supply and demand 6. He highlights the recent collapse of TerraUSD, which failed to maintain its peg due to rapid depletion of reserves, drawing parallels to historical currency crises 2.

    The smaller group of stablecoins, and this includes the one that got into trouble, are based on trading strategies.

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    Yermack suggests that stablecoins following a reserve-backed model tend to be more stable over time 6.

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