S&P Dow Jones Brings Crypto to Wall Street

New indexes will use data provided by digital asset company Lukka.

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key takeaways

  • The S&P Bitcoin Index, S&P Ethereum Index and S&P Crypto Mega Cap Index will measure the performance of the underlying assets
  • S&P Global has plans to expand the indexes to include more coins later this year

The S&P Dow Jones Indexes is bringing bitcoin and ethereum to Wall Street trading floors with the launch of new crypto indexes, it announced Tuesday. 

The S&P Bitcoin Index, S&P Ethereum Index and S&P Crypto Mega Cap Index will measure the performance of the underlying assets. The indexes will use data provided by digital asset company Lukka

“Traditional financial markets and digital assets are no longer mutually exclusive markets,” said Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices, in a statement. “As cryptocurrency becomes more mainstream, investors now have access to reliable and transparent benchmarks backed by institutional quality pricing data.” 

More coins coming

As first announced in December 2020, S&P Global has plans to expand the indexes to include more coins later this year. 

There are currently a variety of crypto indexes offered by various institutions, including the Bloomberg Galaxy Crypto Index and the Fidelity Bitcoin Index. Given how other S&P indexes are regarded and used for different funds and investment vehicles, its new crypto indexes will likely act as the industry standard. 

“This is the first very major index that is widely accepted for traditional products that has now entered the crypto world, so it will help with adoption,” said Henson Orser, president of Komainu. “It is maybe an additional arrow in the quiver for institutional investors who are advocating to launch a product or add a product.” 

Making regulators happy

The S&P crypto indexes may also help to advance digital assets from a regulatory standpoint, Orser said. 

“It will help with internal approvals, but also external approvals,” said Orser. “The SEC and regulators are thinking about the many different ways that this is going to need to be tracked, and having benchmark indices is just another level of acceptance.” 

The launch of the S&P indexes comes amid a flurry of crypto endorsements from some of the biggest names in finance. Morgan Stanley will soon offer crypto exposure to wealthy clients, Goldman Sachs filed a cryptocurrency-tied exchange-traded product and Signature Bank plans to start offering bitcoin-backed cash loans to digital asset clients. 

“Historically, you’ve had the ‘smarty pants’ on Wall Street find a good investment theme, they share that with the sophisticated institutional investors, and then it finally makes its way to Main Street,” Orser said. “This is the first time where we’ve had a product that was adopted on Main Street make its way to Wall Street. It is sort of in reverse order, historically speaking.” 

Bitcoin taking off

Bitcoin, the world’s largest digital currency, is up more than 80% year-to-date and up more than 900% from mid-March 2020. 

“The catalyst for bitcoin taking off is really the unprecedented monetary and fiscal policies that resulted from the pandemic and what can sort of be viewed as immediate debasement of fiat currency,” said Orser. “To see how much money all the central banks were printing in tandem was the catalyst for some of this enthusiasm and mass adoption.”

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