Did you hear?
One of the world's leading financial-data companies officially launched a cryptocurrency index...
On Tuesday 4th May, S&P Dow Jones Global Indices announced its three indexes to track digital assets are now live. The following three indexes were launched using closing prices from May 3:
• S&P Bitcoin Index, which tracks the performance of bitcoin.
• S&P Ethereum Index, which tracks the performance of Ethereum (the second-largest cryptocurrency).
• S&P Cryptocurrency MegaCap Index, which measures the blended return of bitcoin and Ethereum.
The company said these indexes will "make it easier for investors to access prices for digital assets." It also said the indexes could cut down on some of the risk associated with different prices on different exchanges.
But S&P Dow Jones isn't stopping there... Global Head of Innovation and Strategy Peter Roffman said that the group was working to expand its indexes to include more cryptocurrencies.
So what does this mean for the crypto markets?
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A new wave of demand…
These indices will be a useful tracking tool for the crypto space. In addition, having the S&P brand name on anything related to crypto will further legitimise it.
S&P Dow Jones Indices tracks some of the most well-known indexes in the world, including the S&P 500 and Dow Jones Industrial Average. This makes it one of the most-watched global index makers. So the fact that it's tracking cryptocurrencies now lends a sense of legitimacy to the space...
And it could lead to the approval of the first bitcoin (or Ethereum) exchange-traded fund ("ETF") on US exchanges. A regulated-price index launched by one of the mainstays of the financial-data world could be what pushes the SEC to approve an ETF.
That would open up cryptocurrencies to investors through their brokerage accounts. That could pull a wave of new demand into bitcoin, Ethereum, and other cryptocurrencies, likely pushing prices higher.
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Not only could this bring on a bitcoin ETF, but bitcoin index funds as well...
Many of S&P's indexes are tracked by index funds.
These funds track their respective benchmark indexes, meaning they have to buy whatever's in the index. So if an index fund is tracking S&P Cryptocurrency MegaCap Index, it will need to buy the cryptos in the index.
At the end of the day, this move could fuel a wave of new money into cryptocurrencies. It legitimises them as investments and it could lead to the creation of new investment products. That should push prices higher.
In my view, use any volatility and downturns to scoop up more cryptos. There are still plenty of gains to be made.
See you next week.
Managing Editor, The South African Investor