Coinbase Becomes First Crypto Firm to Join S&P 500

Coinbase has become the first crypto company to join the S&P 500. The crypto exchange is set to replace Discover Financial Services in the benchmark index on May 19. The announcement led to an 8% surge in Coinbase’s share price during after-hours trading.

The move marks a significant milestone for Coinbase, further solidifying its position in the U.S. financial landscape. Since its direct listing in 2021, the company has played a growing role in the mainstream adoption of digital assets. Its addition to the S&P 500 symbolizes a growing acceptance of crypto-based firms in traditional financial markets.

S&P 500 Membership Requirements Met

To be included in the S&P 500, companies must meet strict criteria. They need to report a profit in the most recent quarter and maintain cumulative profitability over the last four quarters. Coinbase recently reported a net income of $65.6 million, or 24 cents a share. This is a sharp decline from its $1.18 billion profit a year earlier but still meets the threshold for inclusion.

The S&P 500 is a market-cap-weighted index that tracks the performance of 500 of the largest publicly traded companies in the United States. Its inclusion often triggers institutional buying since index funds and ETFs are required to mirror the index. This addition is expected to drive further demand for Coinbase shares.

Expansion Plans and Market Performance

Coinbase’s entry into the S&P 500 follows its announcement of a $2.9 billion acquisition of Dubai-based Deribit. The acquisition is aimed at expanding its global footprint in the derivatives market. The deal is the largest in the crypto sector to date, signaling Coinbase’s ambitions to scale beyond U.S. borders.

Despite these advancements, Coinbase’s stock has faced turbulence. Shares are down 17% year-to-date, lagging behind Bitcoin, which is up around 10% during the same period. At its peak in 2021, Coinbase’s stock traded at over $357. It currently hovers around $207.22, with a market cap of $53 billion.

What It Means For You [NFA]

Coinbase’s inclusion in the S&P 500 could lead to more institutional interest in both its stock and the broader crypto market. As index funds adjust their portfolios, increased buying pressure may stabilize its price. For crypto investors, this move could represent growing validation for digital assets within traditional finance. However, volatility remains a factor, and it’s crucial to research and understand market risks before making investment decisions.