Bye-Bye Real

Circle (founded in 2013) IPOed last week on the NYSE under the ticker CRCL, with demand exceeding supply by 25 times. The stock surged 250% in the first two days, pushing the company’s valuation to $21.6B — now worth more than Banco do Brasil.

Circle is a financial technology company specializing in digital currency infrastructure and stablecoin issuance, notably USDC. Designed to maintain a stable value, USDC is pegged to the US dollar and fully backed by cash and short-term Treasuries held in a fund managed by BlackRock.

USDC was launched five years ago with the vision that dollar-backed stablecoins could become a foundational element of the modern financial system. Since then, it has established itself as a key pillar of the crypto economy, giving users worldwide easy access to US dollars combined with the advantages of crypto — fast, reliable, secure, and programmable value exchange. Available 24/7, USDC is fully backed by transparent and secure reserves. 

Back in January, Fabrica Ventures’ IC approved our investment in Circle. However, the company entered a quiet period, and we were unable to buy in the private markets. Fortunately, thanks to a clause in our LPA — flagged by our lawyers — we were allowed to buy at the IPO, which we did. We flipped the stock and are pleased to deliver a 3.1x return.

Stablecoins have been widely discussed, but there’s one overlooked aspect that we believe could represent a major upside for Circle

All fiat currencies trend toward zero — something we Brazilians know all too well, having witnessed the collapse of the Cruzado, Cruzeiro, and other failed monetary experiments. And since the introduction of the Real in 1994 (our latest currency) it has already lost 90% of its purchasing power.

Since all fiat currencies are in a race to the bottom, the least bad one prevails, and that has been the US dollar — USDC, for example, now has over $61B in circulation, while EURC, Circle’s euro-backed stablecoin, remains at just $200M. As a result, people around the world seek US dollars as protection against their weakening local currencies — something we Brazilians know all too well.

Thus, in countries with weaker currencies, USDC is increasingly being used as a simple way to adopt the stronger US dollar. Nations like Ecuador and El Salvador had already made the wise move of replacing their chronically unstable currencies with the dollar — and, as a bonus, eliminated central banks and the political abuse of money printing. Now, stablecoins allow people to naturally sidestep failing currencies, bypassing politicians in the process.

Conclusion

Thanks to technology, the state’s role keeps shrinking.