S&P Dow Jones Rockets Crypto Into Mainstream - But Is This The Real Deal?

Wall Street's sleeping giant just woke up and embraced digital assets.

The Institutional Floodgates Open

S&P Dow Jones dropping crypto news isn't just another headline—it's the validation institutional investors have been waiting for. Traditional finance's cautious dance with digital assets just turned into a full-blown tango.

Mainstream Meets Blockchain

Forget niche crypto bros arguing on Twitter. We're talking about the same institutions that move trillion-dollar markets now putting their stamp of approval on digital assets. The same firms that once dismissed Bitcoin as a 'fraud' are now building the infrastructure to support it.

The Reality Check

Sure, Wall Street's embrace feels like victory—until you remember these are the same geniuses who brought us the 2008 financial crisis. Their involvement brings legitimacy but also the same short-term thinking that turns innovative technology into just another profit center.

This isn't just another crypto rally—it's the moment digital assets graduate from alternative investment to mainstream financial instrument. Whether that's a good thing depends on how much you trust traditional finance not to ruin everything it touches.

Image source: Getty Images.

What is the S&P Digital Markets 50 Index?

S&P Dow Jones is best known for its(^GSPC 0.53%), which is arguably the most famous stock market index in the world. If investors want to know how "the market" is doing, they check out the S&P 500. If they want to track the market, they invest in exchange-traded funds (ETFs) and mutual funds that track the S&P 500.

So it's understandable why the term "game-changer" is being thrown around right now. Arguably, for crypto investing to go fully mainstream, it needs to be as approachable and accessible as investing in stocks. That's where the S&P Digital Markets 50 Index could play a big role, making it much easier for investors to track the crypto market.

That being said, it's important to point out that there have been other attempts to create similar types of crypto indices. For example, in November 2024,(COIN 1.72%) launched its Coinbase 50 Index.

Typically, though, any "crypto index" focuses either on cryptocurrencies or on crypto-related stocks, but not both of them at the same time. That's what makes the new S&P crypto index so unique: It is truly a hybrid index, tracking both cryptocurrencies and crypto stocks.

Potential impact of the S&P Digital Markets 50 Index

The launch of the S&P Digital Markets 50 Index could lead to the introduction of new ETFs and mutual funds that track the crypto space. With just a single click, investors will be able to get immediate exposure to a broad basket of cryptocurrencies and crypto-related stocks.

That will make it much easier for investors to diversify their portfolios. And they won't have to worry about using a variety of exchanges or trading platforms to get their exposure just right. It will soon be as easy to load up on crypto as it is to load up on the U.S. stock market.

Longer term, the introduction of the new S&P crypto index could entice a number of high-profile investment firms to embrace crypto for the first time. The obvious company here is, the $10 trillion investment firm known for its popular index mutual funds and ETFs.

Until recently, Vanguard had ignored the crypto space. But in September, Vanguard hinted that it would be open to the idea of offering third-party crypto ETFs (such as spot Bitcoin ETFs) to brokerage clients who want exposure to crypto. So what if Vanguard decides to get involved with crypto? That's when you'll know that crypto has gone fully mainstream.

Does a crypto index really make sense?

That being said, index investing might make sense for stocks, but it might not make sense for cryptocurrencies. There are hundreds of great companies to invest in, but are there hundreds of great cryptocurrencies to invest in?

For that reason, the new S&P Digital Markets Index will track only 15 cryptocurrencies. But even that number may be too large. Beyond(BTC -0.01%) and(ETH -0.57%), the pickings are slim. Maybe you'd want to own some(SOL -1.10%) and(XRP -0.28%), both of which rank among the world's top six cryptocurrencies by market cap.

But WOULD you want to own meme coins as part of the index? Would you want to own highly speculative AI cryptos? Would you want to own tokens used in decentralized finance (DeFi)? If you look through the composition of the Coinbase 50 Index, it looks like a mixed bag. There are definitely some cryptocurrencies in there that would not have a lot of appeal for institutional investors.

Moreover, there is the risk of over-diversification. In other words, you might be loading up on a variety of 50 different digital assets, but not gaining any additional diversification beyond the first couple of names. Instead, you'll simply be churning the portfolio as it rebalances from time to time, racking up additional costs, and spreading your portfolio too thin.

Keep in mind: Most crypto stocks, in one way or another, are highly correlated with the price of Bitcoin. As a result, you might not gain any real diversification from investing in a bigger basket of crypto companies. For example, consider bitcoin mining companies and the new Bitcoin treasury companies. All of these are largely tied to the price of Bitcoin.

Nonetheless, the MOVE by S&P Global is a positive one, and one that should be applauded. At the very least, it will give investors a quick, snapshot look at how "the crypto ecosystem" is doing. It remains to be seen, however, if any new crypto-themed ETFs or mutual funds will be worth investing in later.