According to reports today, S&P Dow Jones Indices, the group behind the S&P 500 and the Dow Jones Industrial Average, has launched a new index, S&P Digital Markets 50, designed to meet the growing investor demand for diversified exposure to digital assets.
The product was introduced by the major index provider as part of its ongoing endeavor to incorporate crypto monitoring tools into its offerings. As institutional demand for crypto benchmarks continues to increase, S&P has previously developed indices that concentrate on digital assets.
S&P 500 debuts new crypto index
Launched in partnership with blockchain firm Dinari, the S&P Digital Markets 50 will bring together 15 main crypto coins and 35 stocks associated with crypto. S&P stated that equities from most companies involved in crypto, blockchain, and related technologies are eligible.
“Cryptocurrencies and the broader digital asset industry have moved from the margins into a more established role in global markets,” said Cameron Drinkwater, chief product officer at S&P Dow Jones Indices. “S&P DJI’s expanded index suite offers market participants consistent, rules-based tools to evaluate and gain exposure to this segment.”
Dinari, which offers tokenized securities, will soon introduce an investable token that aligns with the new benchmark. Tokenization will convert the stocks into digital assets, allowing them to be traded on decentralized blockchains instead of a traditional exchange. By the end of the year, the index will be on Dinari’s dShares platform.
The launch comes with a catch. According to S&P, no single asset will make up more than 5% of the Digital Markets 50. New equity constituents must have a market cap of $100 million, and potential new crypto coins must have a market cap of $300 million.
S&P has confirmed that the index would be subject to the same quarterly rebalancing and governance processes as its other indices.
Why is the S&P exploring new markets?
S&P has launched multi-asset class indices before, but the combination of stocks and crypto is a first for the company. It also wasn’t possible to invest in that kind of index on traditional financial markets.
S&P’s new turn to crypto comes amid some market losses. While billionaire hedge fund manager Warren Buffett has long touted investing in the S&P 500, recent data shows that since 2020, the index has underperformed Bitcoin by around 88%.
While the S&P 500’s USD value has increased by 106% since 2020, it has “collapsed” substantially in BTC currency, as pointed out in an October 5 X post by Phil Rosen, co-founder of the stock market statistics site Opening Bell Daily.
An all-inclusive comparison of Bitcoin and S&P is flawed. The S&P 500 is a comprehensive benchmark for the US stock market, representing the performance of the 500 largest publicly traded companies in the country, an index that is constantly updating, and is seen as a lower risk and reward investment.
Bitcoin, on the other hand, is an original digital asset with an entirely separate set of plots centered on scarcity, decentralization, and deflation, and it has grown in popularity as investors seek new ways to raise or preserve value.
Bitcoin is also very new, has higher day-to-day volatility, and has a substantially lower market capitalization than the S&P 500, at $2.47 trillion versus $56.7 trillion.
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