What Circle’s SPAC says about the longevity of SPACs and stablecoins

By Vanessa Malone

Special Purpose Acquisition Companies, or SPACs, are back on the radar following the news that Circle, the blockchain payments company behind the USDC stablecoin, is becoming a publicly traded company on the New York Stock Exchange. 

The SPAC deal with Concord Acquisition Corp. puts the company at a $4.5 billion dollar valuation.¹

We believe this is promising news for both SPACs and stablecoins, both of which will be offered on our upcoming digital stock exchange and trading app, Upstream.

The SPAC appeal

For SPACs, although the pace has slowed, the market has already surpassed what was generated in 2020 within the first few months of 2021. In 2020, 248 companies raised over $83 billion. So far in 2021, 371 SPACs have raised over $113 billion in gross IPO proceeds.²

In rapidly growing industries like fintech and blockchain, where the idea of companies’ future profits are more appealing to investors, SPACs offer a viable and attractive option to go public based on their projected growth.

By merging with a SPAC, companies may also benefit from wider access to capital, the support of known and experienced Sponsors, and the power to structure the deal and share price in their favor.

The SPAC industry is even beginning to expand globally. Regulators across Europe and Asia are working quickly to get a piece of the action and enable SPACs to list on their markets.

With high-profile companies like Circle continuing to choose the SPAC route, we believe we’ll continue to see exciting opportunities for investors to participate.

As with most SPACs to date, the upside for the Circle SPAC will mostly benefit the well-connected institutional investors who are already in the deal. Upstream aims to democratize the SPAC market with a methodology built to provide issuers a cost effective way to list a SPAC and provide investors equitable access to the multi-billion-dollar SPAC market. Upstream offers the world’s first blockchain-based SPAC IPO marketplace, aiming to give investors of all levels direct access to listed SPAC IPOs using crypto in the form of USDC stablecoin or fiat.

Stablecoins proving necessary

USDC, a joint project between Circle and Coinbase through an entity called Centre is the second largest stablecoin with a market cap of ~$26 billion.³

Stablecoins have a 1:1 value with the US dollar which continues to play a critical role in linking traditional fiat and crypto transactions.

One key reason for the rise of stablecoins is their ability to mitigate some of the volatility inherent in traditional digital currencies like Bitcoin, Ether, etc.

In May, we saw Bitcoin drop from $65,000 to $37,000 after Elon Musk tweeted that Tesla would stop accepting Bitcoin due to potential environmental damage, and after China announced it was banning financial institutions from cryptocurrency-related services.⁴

Coming up on July 18, 2021, nearly 40,000 Bitcoin worth of GBTC shares will be unlocked from Grayscale Bitcoin Trust, the largest Bitcoin fund in the world. Some investors are worried that the potential sell-off from a pool that amounts to more than $530 million could consequently drive Bitcoin’s price down.⁵

Seeing how the value of digital currencies could change by thousands of dollars in the matter of days and weeks, it’s easy to see the benefits a stablecoin like USDC could have in protecting investors.

Although its the second largest stablecoin by market cap, USDC has built a reputation on being one of the most trusted stablecoins. As stablecoins rely on their ability to maintain a true 1:1 peg on the US dollar, its crucial for them to have enough collateral to back the coins. 

The dollars backing USDC are held in reserve bank accounts subject to regular audits in order to maintain its credibility. According to Circle, USDC in circulation has grown in excess of 3400% in 2021.⁶ Circle also vowed to make the reserves behind USDC even more transparent following their public listing.

As a blockchain-powered exchange, it was important to make our exchange accessible to the blockchain community through digital currency, and choosing USDC was an easy choice. For a variety of reasons, we believe USDC will enable Upstream traders to transact using digital currency safely and conveniently. Upstream traders from around the world will be able to invest in crowdfunded securities, digital SPACs, athlete/celebrity ventures and other unique asset classes using both traditional bank payments and USDC stablecoin.

Concluding thoughts

We are thrilled to see innovative blockchain companies like Circle make this meaningful next step to go public. We believe it will further the general public’s acceptance and understanding of blockchain technology and bring investors new opportunities.

Sources:

1,6 Circle| 2 SPACInsider |3 Coin Market Cap |4 Elon Musk tweet | Coindesk |5 Business Insider

Disclaimers:

Upstream is a MERJ Exchange market. MERJ Exchange is a licensed Securities Exchange, an affiliate of the World Federation of Exchanges and full member of ANNA. MERJ supports global issuers of traditional and digital securities through the entire asset life cycle from issuance to trading, clearing, settlement and registry. It operates a fair and transparent marketplace in line with international best practice and principles of operations of financial markets. Upstream does not endorse or recommend any public or private securities bought or sold on its app. Upstream does not offer investment advice or recommendations of any kind. All services offered by Upstream are intended for self-directed clients who make their own investment decisions without aid or assistance from Upstream. Customers must comply with applicable law of their own jurisdiction. By accessing the site or app, you agreed to be bound by its terms of use and privacy policy. Company and security listings on Upstream are only suitable for investors who are familiar with and willing to accept the high risk associated with speculative investments, often in early and development stage companies. There can be no assurance the valuation of any particular company’s securities is accurate or in agreement with the market or industry comparative valuations. Investors must be able to afford market volatility and afford the loss of their investment. Companies listed on Upstream are subject to significant ongoing corporate obligations including, but not limited to disclosure, filings and notification requirements, as well compliance with applicable quantitative and qualitative listing standards.

THIS BLOG SHALL NOT CONSTITUTE AN OFFER TO SELL SECURITIES OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT PERMITTED. US INVESTORS ARE NOT PERMITTED TO TRADE IN UPSTREAM LISTED SECURITIES

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