Coinbase joins S&P 500: What it Means for the Crypto Industry

Coinbase, a leading cryptocurrency exchange, made history on May 19 by becoming the first crypto-related company to join one of the world’s financial indexes. Not only did this announcement lead to a sharp rise in its stock, but it also marks an even bigger milestone in crypto adoption and how crypto is perceived in traditional financial markets. 

So, how does joining the S&P 500 affect the crypto industry? We dive deeply into the significance of Coinbase’s historic announcement to the crypto industry and what lies ahead.

Is Coinbase’s Announcement a Triumph for the Crypto Industry? 

Coinbase’s inclusion in the S&P 500 ultimately shook the crypto space. Still, the road hasn’t been the smoothest for the company, which spent much of the 2020s battling US regulatory agencies for allegedly selling unregistered securities. Was Coinbase at war with the SEC and CFTC? Absolutely! However, the presidential victory of Donald Trump meant that Coinbase and other companies that were persecuted by the SEC would breathe fresh air.

For Coinbase to be accepted, it must meet the profitability, liquidity, and market cap requirements of the financial benchmark index. For a crypto company, that’s not a small feat, especially considering it replaced a traditional finance stock, Discover Financial Services – it’s a massive triumph. However, that triumph isn’t just for the crypto company. Chief revenue officer of Bitpace, Meryem Habibi, said the achievement is a landmark for the blockchain industry.  

“It cements the legitimacy of an entire asset class,” he said in an interview.

Looking at that, Coinbase joining the S&P is a significant boost to both the exchange and the broader crypto industry, which has been subjected to so much scrutiny. This move changes the perception of crypto among traditionalists and will renew investor confidence. It sends a strong message that crypto is maturing into a credible part of the financial space.

The Implications of Joining the S&P 500

Yes! It’s not all bed of roses. The issue with Coinbase joining the financial index is that any mutual fund or ETF tracking the S&P 500 will be forced to buy the crypto company’s stocks. This means millions of American equity investors, whether they like it or not, will be exposed to the crypto market via Coinbase. The crypto company will get a passive inflow of billions of dollars from being part of the index fund. 

Is that bad? Well, some naysayers will agree. They believe an imposition of the crypto sector will ultimately affect the portfolios of these otherwise conservative investors. Some analysts warn that this could be a “disaster in the waiting.”

Will More Crypto Firms Enter the S&P 500? 

Absolutely! We strongly believe that more crypto firms would enter the index. Coinbase has paved the way, so it’s only a matter of time before we see new crypto-related firms in the fold, especially as the cryptocurrency industry is becoming crucial to the world economy. 

Final Thoughts 

It’s a victory for Coinbase and the overall crypto industry. The company’s inclusion in the index fund sparks institutional acceptance and brings exposure to conservative investors. More listings mean crypto companies can access liquidity from fellow investors. It’s premature to say that the crypto industry and TradFi are converging. However, the crypto industry is making headway.