Coinbase Smashes Into S&P 500 – Crypto’s Mainstream Moment Arrives
Wall Street’s old guard just got a crypto wake-up call. Coinbase’s S&P 500 inclusion marks the first pure-play crypto firm to join the big leagues – and the timing couldn’t be more ironic.
From Crypto Wild West to Blue-Chip Status
The exchange’s admission comes after surviving multiple crypto winters, regulatory grenades, and the obligatory ’Bitcoin is dead’ headlines from finance pundits who still think blockchain is a type of ski binding.
Price Impact: Moon or Reality Check?
While index funds will now be forced to buy COIN shares, don’t expect a straight line up. Traditional investors still get hives when they hear ’volatile crypto asset’ – even if it’s now wrapped in an S&P 500 bow.
One thing’s certain: the suits can no longer ignore crypto. Whether that’s good for Coinbase – or just gives Wall Street another way to extract fees from retail – remains to be seen.
Yet with a current market capitalization of $52.7 billion, it remains substantially below the valuation of $86 billion enjoyed after an IPO back in 2021.
And while Bitcoin has accelerated by close to 70% over the past 12 months, COIN’s clocked far more modest gains of about 4%. Year to date, the stock’s down 20%.
Nonetheless, Coinbase’s CEO Brian Armstrong declared this milestone shows “crypto is here to stay,” with Michael Saylor among those offering congratulations. Bernstein analysts are also bullish, writing in a note:
“This event symbolizes the dramatic turnaround in fortunes for the crypto industry and its rising significance as the frontier of financial innovation.”
So… what does joining the S&P 500 mean for this stock’s potential — and for over 100 million customers it has around the world? Let’s find out.
‘The Index Effect’
Market watchers have long argued that stocks added to the S&P 500 enjoy a boost in the short term, in what’s been described as “the index effect.”
However, analysis suggests that these gains have become less pronounced since 2010, meaning there’s far less volatility than there used to be.
Inclusion is significant because exchange-traded funds tracking the S&P 500 need to buy stock to add to their portfolios. This generates buying pressure, and means millions of investors end up indirectly gaining exposure.
Yet as McKinsey & Company pointed out in recent research, a company’s stock price typically “returns to its intrinsic value within two months of inclusion.”
Analysts at Oppenheimer believe the halo effect of joining the S&P 500 will linger for a while, with the investment bank setting a new target of $293 for the stock. That’s a 41% uptick compared with where COIN had closed back on Monday.
Eligibility criteria for this index includes achieving a predetermined market cap, having more than 50% of shares in public ownership, and achieving positive earnings in the most recent quarter, as well as cumulatively over 12 months. That helps explain why MicroStrategy has never been in the running to join the S&P 500, and has had to settle for the tech-heavy Nasdaq 100 index instead.
Coinbase’s net income came in at $526.6 million between January and March, a 22.5% drop compared with the same period in 2024. But with the crypto markets enjoying a renaissance of late — with bitcoin back above $100,000 and Ether surging by 41% in just seven days — analysts widely expect healthier Q2 results as investors pile back in, generating transaction fees in the process.
Riding a High
Coinbase recently generated feverish headlines when it confirmed plans to snap up the derivatives platform Deribit in a $2.9 billion deal, with executives saying the strategic acquisition “will immediately enhance profitability and add diversity and durability to trading revenues.” Pointing out that this WOULD offer additional income streams even during downturns, a blog post explained:
“Options trading revenues are typically less cyclical than spot trading, as traders utilize options to manage risk during both rising and falling markets.”
There are also predictions that Coinbase may MOVE to acquire even more crypto platforms over the months and years ahead, especially considering the exchange had $9.8 billion of cash on hand by the end of 2024.
Yet executives have faced questions over whether the exchange is doing enough to amass crypto on its balance sheet. While the company’s digital asset holdings are now worth $1.3 billion — following an additional $150 million buy in Q1 — critics argue this is streets behind the likes of MicroStrategy.
During a livestream with customers, Armstrong revealed that aggressively investing in BTC would have been difficult during Coinbase’s startup days in the early 2010s — and in any case, the exchange is an operating company rather than a hedge fund.
After years of skepticism, crypto is finally being taken seriously by institutional investors, as evidenced by healthy inflows into Bitcoin and Ether ETFs. The arrival of an exchange in the S&P 500 is a logical next step.
