Key Takeaways
- Market-cap weighted crypto indexes underpin funds that hold huge slugs of bitcoin and ether, but plans for new ones could expand beyond the biggest and well-known coins.
- The latest comes from S&P Global, which blends coins and cryptocurrency-linked stocks in one index.
Big-stock indexes helped draw Americans into the stock market in droves. Will crypto indexes do the same for digital currency?
A big name in the index business this week made the latest bid to do just that. S&P Global (SPGI), the shop behind the S&P 500 and the Dow Jones Industrial Average, unveiled a crypto-specific blend, adding to its list of a couple dozen other crypto indexes. S&P Global’s Digital Markets 50 Index will be made up of 15 tokens and shares of 35 companies involved in some aspect of crypto.
The company likely hopes fund shops will base products on the index—and the crypto industry hopes it and others like it will make investors more comfortable with new tokens and companies. Bitcoin (BTCUSD) and ether (ETHUSD) represent about 85% of the holdings of the Grayscale CoinDesk Crypto 5 ETF (GDLC), Bitwise 10 Crypto Index Fund (BITW), and Hashdex Nasdaq Crypto Index ETF (NCIQ).
More multi-asset crypto funds are starting to trickle into the market. The arrival of those funds speaks to how much the industry has grown, with companies including stablecoin issuer Circle (CRCL) and Winklevoss-twins founded crypto exchange Gemini (GEMI) arriving on major stock exchanges this year.
New funds will test investor appetites for lesser-known tokens. The Digital Markets 50 index’s holdings aren’t available yet, but it will draw from the 300-odd members of the S&P Cryptocurrency Broad Digital Market Index. Even if the new 50-coin index selected only the top 15 tokens from that market-cap weighted list, many investors would likely be learning about several for the first time.
There’s bnb (BNBUSD), native token of international crypto exchange Binance, which can be used to pay transaction fees; Tronix (TRXUSD), the utility token of Justin Sun-founded Tron network; and hype (HYPEUSD), of Hyperliquid, a peer-to-peer exchange that has recently become a power player in crypto derivatives trading.
Why This Matters to Investors
Benchmark indexes like the S&P 500 gives investors a sense of the biggest and most important companies driving the U.S. economy. Multi-asset indexes aim to do the same for the crypto industry.
The SEC has historically approved spot crypto ETFs on a piecemeal basis. Explicit approval had only been granted for bitcoin and ethereum until last month, when the regulator adopted generic listing standards. That change is set to unleash a wave of new crypto funds, including more multi-asset ones, though, the government shutdown has put a pause on things.
The Grayscale CoinDesk Crypto 5, which tracks an index with smaller weightings in Ripple’s xrp, solana, and cardano, recently converted from an LLC. The Hashdex Nasdaq Crypto Index ETF, which prior to last month only held bitcoin and ether, counts those coins as constituents, as well as the native token of the Stellar network, lumens (XLMUSD). The Bitwise 10 Crypto Index Fund, a trust waiting for ETF-conversion approval, also holds Chainlink (LINKUSD), and Avalanche (AVAX) tokens, as well as other altcoins.
Bitcoin and ether have a combined market capitalization of almost $3 trillion, roughly 70% of the $4.4 trillion market, according to research platform Messari.