After a FAD-filled year for Special Purpose Acquisition Companies (SPACs) driven mainly by high net worth individuals and private family offices, it now seems that the duo is shifting its focus on crypto at a remarkably high proportion.
SPACs have in the recent past created a desirable return on investment for these individuals since they are created to merge with or acquire promising start-ups that require a huge amount of capital without necessarily taking the traditional route for IPOs.
A growing shift into crypto
The disinterest in traditional companies by investors has been attributed mainly to tight regulations by the SEC and the high rate of failure in start-ups, which has prompted them to venture into other investment alternatives, notably, cryptocurrencies.
Speaking to Bloomberg, Meena Flynn, global co-head of private wealth at Goldman Sachs noted that family offices influencing capital markets had continued to increase.
“In terms of what we found to be most notable were the allocations to alternatives, their interest in digital assets and also their focus on operating businesses,”she said
When asked whether these wealthy individuals shared a similar approach to investing crypto with the more wanderlust day traders, she noted that these individuals were mainly focused on the value and took on a long-term investment approach.
“I would say the interest is absolutely there when you see Bitcoin parabolic as we did in the first quarter it definitely has investors asking a lot of questions and there is this survey that suggested that roughly about 15% of families are invested in crypto-assets and another 45% looking at it.”
She noted that the 15% that is invested are doing it prudently at just around 1-3% of their portfolio. These investors were viewing these holdings as potentially a hedge against inflation.
The 45% were mainly interested in Bitcoin’s store value among other issues surrounding regulation tailwinds or headwinds and sustainable investing.
Crypto-based SPACS on the rise
Even as more wealthy private individuals venture into cryptocurrency investing, SPACS has also taken a similar route with notable crypto companies merging with acquisition firms to grow their businesses.
Earlier this month private firm Far Peak acquisition Corp. announced a SPAC deal to bring crypto start-up Bullish public.
“This is an opportunity to invest early in the digital assets market structure business. I believe it has a lot of rewards. I am going in as C.EO. of this business full-time. – Digital assets are here to stay. The smartest engineering talent is going into digital assets; digital assets are solving very important problems,” Far Peak Acquisitions Corp C.E.O Tom Farley said in an interview with CNBC.
This is even as Core Scientific, the largest digital currency bitcoin mining firm, announced on Wednesday plans to merge with XPDI, a SPAC which will result in core scientific becoming a public traded company on Nasdaq.
Bitcoin’s price rallied in the 2nd quarter of the year to almost hit $65,000 before correcting by just about 53% in May. This correction has impressively attracted private firms and family offices’ interest in understanding blockchain and ledger distributed technology prompting a notable number to allocate some part of their investment portfolio to cryptocurrencies and crypto-related firms.
Moving forward, they see a lot of opportunity in private markets where they can invest in the early stage as public companies and later take advantage of the technologies to run their businesses more effectively.