S&P Dow Jones Indices has launched three new cryptocurrency indices. The S&P Bitcoin Index, S&P Ethereum Index, and S&P Crypto Mega Cap Index (a combination of Bitcoin and Ethereum) will allow retail investors to easily gain exposure to these two powerful cryptocurrencies.
The long-awaited move
People have long waited for a traditional financial product to track cryptocurrency prices. S&P announced last year that it will create a cryptocurrency index in 2021 and it has fulfilled this promise with its latest launch.
New indexes can be used as tracking and comparison tools in the current financial world. More reliable pricing from an authoritative source will prevent investors from connecting to potentially dubious APIs. They do not necessarily provide correct pricing data. S&P hopes this move will make it easier for investors to access a new class of crypto assets, and says it will reduce some of the risks associated with their speculative and volatile nature.
There is still no global product that retail investors can directly purchase to get exposure to real cryptocurrency prices like ETFs. The closest to that is the GBTC, which, however, is not always the exact measure of exposure as its premium fluctuates strongly. However, the S&P movement serves to further legitimize and strengthen the position of the cryptocurrency industry in the world of stocks and ETFs. This whole industry is just warming up to the adoption of cryptocurrencies.
The indices use data from Lucca, which is a cryptocurrency data provider. The Lucca process checks the various exchanges on the basis of transparency, data integrity and other factors to determine their inclusion in the final price weight.
They are available in most major index catalogs under the SPBTC, SPETH and SPCMC tickers, respectively. SPCMC is of particular interest. This is because it is weighted by market capitalization, therefore there will be a quarterly rebalancing. Its purpose is to change the proportions of the underlying cryptocurrencies (in this case, BTC and ETH). This will ensure that investors do not remain overexposed or under-exposed to one of them in the event of a major price movement that sharply changes the ratio of the index basket.