Important points
- Market cap-weighted crypto indexes currently focus on major players like Bitcoin and Ether, but a new index is set to broaden its scope beyond just the most prominent coins.
- This latest development comes from S&P Global, which is integrating both cryptocurrencies and crypto-related stocks into a single index.
Large-cap indexes have successfully attracted many Americans to invest in the stock market. So, could cryptocurrency indexes do the same for digital assets?
This week, S&P Global, a leader in the index sector known for the S&P 500 and Dow Jones Industrial Average, unveiled a new cryptocurrency-specific mix, adding to the existing multitude of crypto indexes. The S&P Global Digital Markets 50 Index features a combination of 15 cryptocurrencies and 35 companies that are engaged with cryptocurrencies in various ways.
The firm likely hopes this index encourages funds to create products based on it, potentially increasing investor confidence in new tokens and companies. In existing crypto funds, Bitcoin and Ethereum make up an impressive 85% of assets in notable products like the Grayscale Coindesk Crypto 5 ETF and the Bitwise 10 Crypto Index Fund.
There’s been a noticeable uptick in the availability of multi-asset crypto funds in the market. This growth reflects the expanding industry, with players like Circle, a stablecoin issuer, and crypto exchange Gemini, co-founded by the Winklevoss Twins, making their marks on major stock exchanges this year.
The upcoming fund will gauge how much interest investors have in lesser-known tokens. While details on the Digital Market 50 Index’s holdings aren’t available yet, they will be sourced from over 300 cryptocurrencies in the S&P Cryptocurrency Broad Digital Market Index. So, even if the new index focuses on just the 15 largest tokens, many investors might be getting introduced to these options for the first time.
Tokens like BNB, from the Binance exchange—which helps cover transaction fees—are part of this landscape. Then there’s Tronix, a utility token for the Tron network created by Justin Sun, and Hyperliquid’s Hype, which has recently gained traction in the crypto derivatives market.
Why this matters to investors
Benchmark indices, like the S&P 500, provide insight into the top companies driving the U.S. economy. Similarly, multi-asset indexes attempt to shed light on the cryptocurrency sector.
The SEC has previously approved spot crypto ETFs gradually, focusing first on Bitcoin and Ethereum until last month. That’s when new common listing standards were introduced, potentially leading to a surge in different crypto funds, including more multi-asset options. Still, a government shutdown has stalled progress.
Grayscale’s CoinDesk Crypto 5 Index now includes a wider range of cryptocurrencies, previously limited to just Bitcoin and Ether, which have recently added tokens like Ripple’s XRP and Cardano. The Hashdex Nasdaq Crypto Index ETF is evolving too, now incorporating these coins along with Stellar’s Lumens. Meanwhile, the Bitwise 10 Crypto Index Fund, which is seeking ETF conversion approval, has expanded its holdings to include Chainlink and Avalanche among other altcoins.
Bitcoin and Ether together hold a market cap of around $3 trillion, accounting for about 70% of the entire $4.4 trillion crypto market, according to research platform Messari.
