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- Since joining the crypto sector in May, this is the first big expansion of S&P’s crypto benchmarking capabilities
- It’s unclear which assets BDM and its subgroups use to create their market picture
- This methodology, according to S&P spokesman Ray McConville, better depicts asset appreciation over time
On Tuesday, S&P Dow Jones Indices announced the launch of five new cryptocurrency indexes, marking the company’s first significant expansion of its digital asset benchmarking tools since entering the market in May. Since joining the crypto sector in May, this is the first big expansion of S&P’s crypto benchmarking capabilities. As institutional players become more interested in crypto, S&P Dow Jones unveiled an index on Tuesday that attempts to provide investors with a consistent image of the global crypto sector.
New Indexes from S&P Dow Jones
S&P Dow Jones Indices, the world’s largest index provider, announced the launch of five new cryptocurrency indices on Tuesday. There are now eight cryptocurrency indices available from the organization. According to a press release, the tranche’s centerpiece is a broad digital market, or BDM, index, which includes over 240 cryptocurrencies. The new subindices also enable several slices and dices of the BDM by market cap, according to an S&P spokeswoman, allowing investors to monitor different sections of the market. The S&P Cryptocurrency Broad Digital Market Index analyses 240 cryptocurrencies with a market capitalization of more than $10 million that match a few criteria for inclusion. S&P has previously produced indices for bitcoin and ethereum, but the new metric will provide a broader perspective on the crypto economy.
According to S&P’s website, the index is designed to reflect a large investable universe. S&P’s crypto data partner, Lukka, did not respond to the comment right away. HXRO is the 240th most valuable cryptocurrency in terms of market capitalization, however, it’s unclear whether S&P’s standards are based on size. The S&P Cryptocurrency BDM Ex-Megacap Index is the second subset, which excludes the S&P Cryptocurrency Megacap Index’s members. The performance of bitcoin and ethereum is measured by the crypto mega-cap index.
The index will be skewed toward the top. According to CoinMarketCap, bitcoin and ethereum account for 62.8 percent of the total crypto market, while the top ten cryptocurrencies account for 82 percent. Apple and Microsoft, the top two stocks in the S&P 500, account for only 11% of the index. The top ten stocks account for slightly over a quarter of the S&P 500, or 27.9%.
The S&P Cryptocurrency BDM Ex-Largecap Index, which excludes the constituents of the S&P Cryptocurrency Largecap Index, is another new index. The S&P Cryptocurrency Large Cap Ex-Mega Cap Index, the fifth index, measures the performance of the S&P Cryptocurrency Largecap Index’s members minus the S&P Cryptocurrency Megacap Index’s constituents.
These new indices join three previous S&P Digital Market Indices that were introduced in May. The three are the S&P Bitcoin Index, S&P Ethereum Index, and S&P Cryptocurrency Megacap Index. The addition of our Digital Market Indices family delivers one of the largest perspectives yet of this fast-rising asset class, with the option to slice and dice by market cap, said Peter Roffman, global head of Innovation and Strategy at S&P Dow Jones Indices. They are ecstatic to deliver the cryptocurrency market this level of further openness.
The S&P 500 Move Indicates Wall Street’s Interest
The products’ snapshot perspective reflects Wall Street’s goal to corral the Wild West-like crypto markets into a more digestible shape. These newcomers, like S&P’s first three crypto indices, use points instead of prices to display market performance. According to S&P spokesman Ray McConville, this methodology better portrays asset appreciation over time. A methodology document issued in July 2021 explains S&P’s mathematical approach for computing index points.
The major two mega-cap coins have tended to move in lockstep with the broader crypto market. According to Insider’s research of the S&P crypto indices, the 238 top cryptocurrencies excluding bitcoin and ethereum are closely connected with an index that only includes bitcoin and ethereum. (Data from February 2017, when the indices began, was used, and the correlation coefficient was 0.76.)
Broad Digital Market, Crypto LargeCap, BDM Ex-MegaCap (without bitcoin and ether), BDM Ex-LargeCap (without the Large Caps), and Crypto LargeCap Ex-MegaCap are the new indexes.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
