S&P Dow Jones Has Announced Exciting Updates for Cryptocurrency Investors. Does This Mark a Major Shift?

On October 7, S&P Global ( SPGI 0.24%) introduced the S&P Digital Markets 50 Index. This newly launched market cap-weighted index from S&P Dow Jones Indices is designed to monitor a group of 50 cryptocurrencies and crypto-focused stocks. Ideally, it offers investors a quick overview of the overall performance of the crypto sector.

Some observers have already described this index as a potential turning point for the crypto and blockchain industries. But is that really the case? Here’s what you should know.

What is the S&P Digital Markets 50 Index?

S&P Dow Jones is most widely recognized for its S&P 500 Index ( ^GSPC 0.53%), arguably the world’s most well-known stock market benchmark. When investors want to gauge the market’s health, they look at the S&P 500. To mirror the market’s performance, they often invest in mutual funds or ETFs that track the S&P 500.

This is why many are calling the new index a “game-changer.” For crypto to achieve widespread adoption, it needs to be as straightforward and accessible as stock investing. The S&P Digital Markets 50 Index could be a key step in that direction, simplifying the process for investors to follow the crypto market.

However, it’s worth noting that there have been previous efforts to create similar crypto indices. For instance, in November 2024, Coinbase Global ( COIN 1.72%) rolled out its own Coinbase 50 Index.

Most “crypto indices” up to now have focused solely on either cryptocurrencies or crypto-related equities, rarely both together. What sets the new S&P crypto index apart is its hybrid nature, as it tracks both digital currencies and crypto stocks in one index.

Potential impact of the S&P Digital Markets 50 Index

The debut of the S&P Digital Markets 50 Index could pave the way for new ETFs and mutual funds that mirror the crypto sector. With a single investment, individuals could gain broad exposure to a diverse mix of cryptocurrencies and crypto-related equities.

This development will make it far simpler for investors to diversify their holdings. They won’t need to juggle multiple exchanges or platforms to achieve their desired exposure. Soon, investing in crypto could become as straightforward as investing in the U.S. stock market.

Over the long run, the arrival of this new S&P crypto index might encourage major investment firms to enter the crypto space for the first time. One prominent example is Vanguard, the $10 trillion asset manager renowned for its index funds and ETFs.

Vanguard had largely stayed away from crypto until recently. But in September, the company signaled it might allow brokerage clients to access third-party crypto ETFs, such as spot Bitcoin ETFs. If Vanguard fully embraces crypto, it would mark a significant milestone in crypto’s journey into the mainstream.

Does a crypto index really make sense?

Still, while index investing is logical for stocks, it may not be as suitable for cryptocurrencies. There are hundreds of solid companies to invest in, but are there that many worthwhile cryptocurrencies?

Because of this, the new S&P Digital Markets Index will only include 15 cryptocurrencies. Even so, that might be too many. Beyond Bitcoin ( BTC 2.41%) and Ethereum ( ETH 3.90%), the options become limited. You might consider adding Solana ( SOL 3.70%) and XRP ( XRP 2.40%), both of which are among the top six cryptocurrencies by market value.

But would you want meme coins included in the index? What about highly speculative AI tokens? Or coins used in decentralized finance (DeFi)? If you examine the Coinbase 50 Index, you’ll find a wide variety—some of which may not appeal to institutional investors at all.

There’s also the danger of spreading investments too thin. In other words, holding 50 different digital assets might not actually provide more diversification beyond the top few. Instead, you could end up frequently rebalancing the portfolio, incurring extra costs, and diluting your holdings.

Remember, most crypto stocks are closely linked to Bitcoin’s price in some way. So, investing in a larger group of crypto companies may not provide much additional diversification. For instance, Bitcoin mining firms and companies holding Bitcoin as treasury assets are all heavily influenced by Bitcoin’s price movements.

Even so, S&P Global’s initiative is a positive step and deserves recognition. At the very least, it offers investors a quick way to gauge the state of the “crypto ecosystem.” Whether any new crypto-focused ETFs or mutual funds will be worthwhile investments remains to be seen.