Coinbase Joins the S\&P 500: A Landmark Moment for Crypto’s Integration Into Mainstream Finance

A milestone that underlines the increasing coming together of conventional finance and the world of digital assets is Coinbase’s recent addition to the S\&P 500 index.

This marks the first time a crypto company has been included in this prestigious benchmark. When Coinbase was added to the S\&P 500, it replaced Discover Financial.

After making its public debut in April 2021, Coinbase has had to deal with the ups and downs of the landscape it serves. From the wild price swings that are part of the life of digital assets to the next wave of regulatory scrutiny that’s coming for crypto, the exchange has seemed to stand its ground. It isn’t always pretty (or as some in the crypto community would like, as ‘decentralized’ or ‘permissionless’ as a hub can sometimes be), but Coinbase very much has a situation under control.

The business model has moved way beyond just trading fees. Coinbase has constructed a diversified portfolio of services, among them Base (its Ethereum Layer 2 network), custodial services for institutional clients, and even a lending platform. Meanwhile, in partnership with Circle, it has a major role in the stablecoin ecosystem through USDC. This deep strategy, clearly laid out in its S-1, positions the company centrally in a digital finance infrastructure ecosystem.

By joining the S&P 500, Coinbase has gone from being a wild stand-in for crypto play to a bona fide financial firm—not that any of this is likely to help its stock price. Unlike the underlying assets traded on its platform, Coinbase’s share price is entirely driven by supply and demand. And right now, demand is not exactly through the roof.

Being included in the S&P 500 is both a practical and a symbolic home run for Coinbase.

From a practical standpoint, the S&P 500 is the most widely followed stock index in the world. Significance is attached to being in it, and billions of capital index funds that are built around this index effectively buy the stocks in it.

The Coinbase IPO Coin listing is good for the index fund in an S&P 500 and is more beneficial to the company being included than to the index fund itself.

Yet, this powerful message is sent beyond just the immediate market mechanics: the infrastructure associated with cryptocurrency no longer exists on the periphery. It’s now a part of the financial core — and that is a powerful message.

For all the skepticism with which many finance types regard digital assets, Coinbase is now part of the S&P 500. And for many allocators of capital, that is a very big deal indeed.

Coinbase’s visibility among mainstream investors and institutions is enhanced by the shift. For the longest time, exposure to cryptocurrency could only be obtained via speculative tokens or by going the ETF route, both of which are very risky propositions. But now fund managers and pension plans have a more sensible vehicle to use if they want to gain indirect exposure to the asset class. And that vehicle is a company—specifically, one that operates under U.S. regulatory frameworks and delivers financial services with a crypto backbone.

In terms of significance, this is a tipping point. The Nas- daq’s acceptance of Coinbase means something very new and very big: for the first time, a crypto-native company has not just passed through the public market’s gate, but also been recognized as a fundamentally trustworthy part of the U.S. economy. This wasn’t a simple listing. It is a step forward in the validation of a yet-to-be-seen crypto economy.

Coinbase’s upswing correlates with several other important occurrences that indicate a strengthening blend of classical finance (TradFi) and the crypto universe. This year, for instance, heralded the introduction of Bitcoin ETFs, an event that, after a long wait, finally opened the door to the average investor and allowed them to step inside and enjoy a regulated, financially secure way of being exposed to the original cryptocurrency. Without cracking open the Bitcoin ETF door, we would probably be seeing an investment-friendly doorstop instead.

The sector is reaching maturity; it is no longer simply concerned with digital currencies or speculative trading. It has moved on to building new financial architecture. Coinbase is using its Base chain and custodial infrastructure to help lay that new architecture, a new wave of decentralized applications, settlement systems, and payment flows that interact with, but also sometimes circumvent, “legacy finance.” Those new flows are starting to power a settlement layer for the kind of programmable money that cryptocurrencies were supposed to be.

Wall Street observes with great interest — and, more crucially, it is beginning to take part. As $COIN increasingly finds a home in S&P 500 portfolios, the distinction between crypto and traditional finance is vanishing faster than ever.

Being part of the S&P 500 is not just a win for Coinbase; it mirrors progress in the crypto space. We have come a long way from the early, unsettled days of crypto. Now, with Bitcoin having its 14th birthday this week, in 2023, the same year that Web3—and associated cryptocurrencies—are expected to generate at least $500 billion in global revenues, Bitcoin’s price, at a solid $28,000, is the least part of the story.

This moment signals a new epoch—one where crypto is not merely an outsider disrupting the landscape but a key participant in molding the future of finance. The infrastructure of that future is being put in place as we speak, and by no less a part of the establishment than the SEC, which has recently upped its game with a slew of new charges against crypto firms.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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