In a significant development for the cryptocurrency and financial markets, Coinbase Global Inc. is set to become a part of the prestigious S&P 500 index. As announced in a release on Monday, the crypto exchange will replace Discover Financial Services in the benchmark index, a move that has already sent ripples through the investment world.
The change is scheduled to take effect prior to trading on May 19. This comes as Discover Financial Services is in the midst of being acquired by Capital One Financial. Since its direct listing in 2021, Coinbase has steadily grown in prominence within the U.S. financial system. The soaring value of bitcoin and regulatory approvals enabling large institutions to create spot bitcoin exchange – traded funds have contributed to Coinbase’s increased significance.
The news of Coinbase’s inclusion in the S&P 500 led to an immediate market reaction. Shares of the crypto exchange jumped 8% in extended trading. Historically, stocks added to the S&P 500 often experience a rise in value. This is because numerous funds that track the S&P 500 will be compelled to add the newly included company to their portfolios, increasing demand for its shares.
Coinbase’s journey to S&P 500 inclusion has been marked by both growth and volatility. Bitcoin’s recent performance has also been a factor. Last week, bitcoin spiked, topping $100,000 and approaching its record price from January. However, Coinbase’s stock has been particularly volatile. Closing at $207.22 on Monday, the company has a market capitalization of $53 billion, well below its peak in late 2021 when the stock traded at over $357.
To qualify for inclusion in the S&P 500, a company must meet certain financial criteria. It must have reported a profit in its latest quarter and have cumulative profit over the four most recent quarters. Coinbase met these requirements. Last week, it reported a net income of $65.6 million, or 24 cents a share, down from $1.18 billion, or $4.40 a share a year earlier, after accounting for the fair value of its crypto investments. Despite the year – on – year decrease in net income, its revenue showed growth, rising 24% to $2.03 billion from $1.64 billion a year ago.
Furthermore, just last week, Coinbase announced ambitious plans to acquire Dubai – based Deribit, a major crypto derivatives exchange, for $2.9 billion. This deal, the largest in the crypto industry to date, is expected to help Coinbase expand its operations outside the U.S. significantly. However, despite these positive developments, Coinbase shares are down 17% this year, underperforming bitcoin, which has seen a gain of about 10% over the same period.
The S&P 500, which is heavily influenced by the large market caps of tech industry heavyweights, continues to diversify by adding companies from across various sectors. In September, Dell and defense software provider Palantir were added to the index, following in the footsteps of artificial intelligence server maker Super Micro Computer and security software vendor CrowdStrike, which were included earlier last year. Coinbase’s addition to the S&P 500 not only reflects its own growth and financial standing but also signals a growing acceptance of cryptocurrency – related companies within the traditional financial mainstream.
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