Wall Street just created a new class of crypto investor ― the inadvertent degen: mom-and-pop investors who are now exposed to the buzzing asset class.
On May 19, Coinbase, the top crypto exchange in the US, will become the first digital assets venture to join the S&P 500, the bellwether index of American companies.
This means Coinbase will have membership in the same exclusive club as Apple, Amazon, Berkshire Hathaway and other household names.
It also means the 13-year-old company’s shares will get a lift from millions of new investors who hold S&P 500 exchange-traded funds, often via retirement accounts.
$3 trillion
The scale is immense — State Street’s groundbreaking S&P 500 ETF, for instance, manages more than $572 billion in assets.
And in the last decade, so-called passive investors have ploughed almost $3 trillion into the market, according to Goldman Sachs.
Coinbase’s stock jumped 16% in mid-morning trading New York time, blowing away the S&P 500, which was up less than 1%.
Of course, being a crypto company means Coinbase’s fortunes rise and fall in connection with the performance of Bitcoin and the broader market.
In the first quarter, the volatility unleashed by President Donald Trump’s trade war whipsawed Coinbase’s income statement.
Its top line slumped 10%, to $2 billion, compared with the same period last year. And its net income fell 94%, to $66 million.
That period now feels like yesterday’s news as crypto rallies.
And Coinbase’s bullish phase is just getting started, say Bernstein analysts.
In a note sent to clients on Tuesday, they predicted Coinbase’s stock will soar 50% by the end of the year.
“As the saying goes, first they ignore you, then they laugh at you, then they fight you, then they add you to the S&P 500 ― or something like that,” the company quipped in a blog post on LinkedIn.
Bruising period
Coinbase has been through a bruising period.
In 2023, the US Securities and Exchange Commission accused the company of unlawfully running an unlicenced exchange and trading unregistered securities on behalf of investors.
Led by CEO Brian Armstrong, Coinbase denied the allegations and countered that the SEC, under then-Chair Gary Gensler, was unfairly punishing it and other crypto companies for pursuing an innovative business model.
Had the case gone to trial and Coinbase lost, the result would have been a serious blow. The Trump administration put an end to the crackdown and in February the SEC dropped the case.
For growth companies like Coinbase, the best long-term benefit of adding passive investors to its ranks is stickiness. With an eye on building nest eggs, they tend to ride out bear markets and shrug off volatility.
In that sense, mom and pop investors have something in common with their crypto cousins — they like to hodl.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.
