S&P Dow Jones is planning to launch crypto currency indices in 2021, making it the latest major financial company to embrace crypto. This is a big win for bitcoin and digital currencies.
The move is aimed at providing S&P clients with customizable indices and other benchmarking tools on cryptocurrencies.
With a digital currency market burgeoning at a rapid rate, there is more and more of a need for independent, reliable and user-friendly benchmarks,
----said Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices.
Also, bitcoin surpassed its 2017 all-time high this month. The digital currency has risen up to more than 170% of its value this year, outperforming the dollar by far. It was traded at $19, 300 last Thursday, and at $19,800 the preceding monday. The move by S&P, which is one of the world’s well-known index providers can pave the way for cryptocurrencies to go mainstream.
There is still an issue for more reliable pricing data in the crypto market. Surging investor interest in digital coins has also increased this need for more reliable data for cryptocurrencies. Price volatility is another major problem for digital currencies.
S&P is thus partnering with NY-based crypto-currency data provider Lukka on more than 550 of the trop traded coins, with the hope of bringing in more stable and reliable crypto pricing data for mainstream investors.
There are already some crypto indices to choose from in Wall Street. Nasdaq for instance
, has listed multiple cryptocurrencies in the past few years. And since 2018, Bloomberg Galaxy crypto index has provided quotes for highly liquid cryptos. With now S&P entering the cryptocurrency space, it’s fair to say that digital currencies are going mainstream.
Meanwhile some have been calling the high crypto prices this month a deja-vu. There are valid reasons as not to get caught up in the bitcoin hype. For instance, some say that bitcoin produces no earnings, pays no dividends, pays no interest, so it ‘ s not an investment in the traditional sense as also, its value is purely dependent on what someone else is willing to pay for it in the future. That it ‘s different from investing in stocks, where you are betting on the future earnings of the company that produces goods and services. Does that however mean that you cannot make money on cryptos ?
I think digital currencies are not that different from traditional investments. In the general sense you are still betting on the future value of something that will be scarce over time.
In many instances, you are also betting on a company, the coin provider and on the goods and services that company is providing now and in the future - the goods and services being all tools and services associated with the issuance of that currency, including the currency itself.
We have to remember that cryptocurrencies are not all the same. Some like bitcoin, can be compared to gold while others are more analogous to traditional stock investments.
Other critics point out the lack of reliable pricing data and of institutionalized investment tools.
They have to remember that crypto currencies are still nascent. They will get there sooner or later. At least, Chief Executive Officer Dan Schulman of Paypal Holdings Inc. believes that cryptos are set to go mainstream as merchants these days take a digital-first approach.