S&P Dow Jones Indices has launched three crypto-based indices, the S&P Digital Market Indices.
First, the S&P Bitcoin Index (SPBTC) naturally is based on the performance of bitcoin (BTC). Second, the S&P Ethereum Index (SPETH) is based on ethereum (ETH). Meanwhile, the S&P Cryptocurrency MegaCap Index (SPCMC) tracks the performance of both BTC and ETH. However, it is also weighted by market cap.
The intention of the crypto indices is to track the performance of the crypto assets. Specifically, those listed on well-known transparent exchanges. These are ones that meet minimum liquidity and market capitalization criteria. The stated goal of the indices, according to S&P DJ, is “to bring transparency to the emerging cryptocurrency market”.
The world’s leading index provider had previously stated that it would launch cryptocurrency indices in late 2021. They also said that later this year the Indices would include additional coins and broader-based indices later this year. Besides large cap and broad market benchmarks, this will eventually include coverage of up to 550 digital assets.
Rationale for the Digital Market Indices
As investment in cryptocurrencies increases, institutional investors have felt an increasing need to supply its customers with the tools they need “to access and assess this emerging technology-driven asset class.” By launching the Digital Market Indices, S&P DJI wants to mitigate some risks associated with the volatile market.
“Traditional financial markets and digital assets are no longer mutually exclusive markets,” said Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices. “As cryptocurrency becomes more mainstream, investors now have access to reliable and transparent benchmarks backed by institutional quality pricing data.”
Data from Lukka
To determine the validity of the crypto assets’ pricing, Lukka provides the data used for the indices. The New York-based firm is a crypto software, accounting and data provider. Specifically, the data comes from its products Lukka Reference Data and Lukka Prime. The latter takes the end-of-price data at 4:00 EST for the index calculation.
According to the announcement, Lukka is a crypto asset data services provider for institutions. These include fund administrators and fund auditors, which are serving over 160 active crypto funds. The company’s investors include S&P Global, in addition to billionaire investor George Soros and accounting advisor CPA.com.