Alternative Investing Report - February 6, 2025

*as of 2/5; Sources: S&P, BTC, FTSE, DJRE, CL50

A new study from climate risk modeling company First Street estimates that climate change could cause the housing market to lose $1.5 trillion in value over the next 30 years. The study projects that California, Texas, and Florida will be particularly hard hit, a trend that has already begun with wildfires, ice storms, and hurricanes. The housing market will also be fundamentally transformed, with 55 million Americans projected to move to areas with fewer climate risks over the next three decades.

➨ TAKEAWAY: Just the risk of climate disasters has already caused homeowners’ insurance prices to rise dramatically in certain areas of the country, with the study projecting Miami, Jacksonville, and Tampa to see the biggest hikes over the next 30 years. This does not include flood insurance, which could see significant increases in certain other markets like New Orleans and Atlantic City. Investors with an eye for the long term should be aware of the climate risks in their target markets, and underwrite for rising insurance costs.

The SEC’s newly formed Crypto Task Force laid out its top ten priorities in reshaping U.S. crypto regulation, including clarifying whether certain assets are securities and whether lending and staking programs are covered by securities law. The group is also considering whether to offer “retroactive relief” to certain token offerings that faced enforcement actions in the past. Any potential relief would not apply to companies that engaged in fraud or misled investors, and would be limited to projects that exhibited strong utility cases for their tokens.

➨ TAKEAWAY: There was a time back in 2017-18 that initial coin offerings (ICOs) were the principal method used by blockchain startups to raise capital, but they were also rife with fraud. Ultimately, the SEC cracked down on many of them for selling unregistered securities. If the commission retroactively rescinds penalties handed down to some of those companies, it signals that a new era of ICOs could be on the horizon. The less regulation the SEC decides to place on the crypto industry, the more likely the industry could go back to its Wild West days, which would offer both rewards and risks for investors.

💵 Private credit marketplace: Only a week after releasing a new tokenized private credit offering, the alternative asset manager Apollo announced its intentions to build a secondary marketplace that would allow investors to buy and sell private credit assets, another step in democratizing the asset class.

🪙 Stripe closes Bridge acquisition: The payment processing giant Stripe is paying $1.1 billion for stablecoin platform startup Bridge, which built an API to help companies accept stablecoins as payments. It is a big bet on crypto for Stripe, which is one of the most prominent pre-IPO startups in the world.

🚘 $36 million Ferrari sale: A 1964 Ferrari 250 LM race car sold for $36.3 million at Sotheby’s, significantly exceeding the pre-sale estimate of $26 million and becoming one of the top five car sales ever at auction.

🏢 Distressed CRE assets: The amount of distressed commercial real estate assets in the U.S. reached $107 billion in Q4, the highest level in a decade and a 24.3% year-over-year increase. The office sector continues to lead the way, with $51.6 billion of distressed properties.

🚀 Pain treatment startup funding: Multiple healthtech startups focusing on pain management and treatment have raised $100 million rounds in the past year, and could receive greater interest with the news that public company Vertex Pharmaceuticals received FDA approved for a non-opioid pain pill.

🎨 Caspar David Friedrich retrospective: A look at the new exhibition at the Metropolitan Museum of Art in New York focuses on the 19th century German painter, whose work is likely to receive a boost from the newfound attention.

According to new guidelines released by the U.S. copyright office, art created by generative AI is not protected by copyright law. The reasoning behind the ruling is that there is not sufficient human control over the art generated, so a human trying to copyright the image would not be recognized as the creator — the AI system would. This paradigm would also be the case for AI generated written work. According to the ruling, “the issue is the degree of human control,” meaning that AI art or AI-generated writing that is edited or modified to a large enough extent could qualify for copyright protection. The rise of AI could pose an existential threat to creatives of all types, and the lack of copyright protection, for now, is a good incentive for companies to continue to solicit human-created work.