Key Takeaways
- The S&P Pantera Digital Asset Index excludes bitcoin and focuses on tokens with real-world use and revenue-generating blockchains.
- The index includes 18 digital assets, with ether, bnb, sol, tronix and hype as its top constituents.
- Unlike other crypto benchmarks, this index avoids bitcoin-heavy weightings to highlight underrepresented assets.
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The elephant in the crypto universe is getting snubbed.
S&P Dow Jones Indices, the index provider behind the S&P 500, and crypto investment shop Pantera Capital launched a new benchmark for digital assets yesterday called the S&P Pantera Digital Asset Index. It isn’t the first yardstick that aims to represent the crypto market, but it is likely among the more high-profile that doesn’t include bitcoin.
That’s by design—the 18-constituent index’s main feature is that it only includes tokens that show real-world use and whose underlying blockchains generate revenue, or “things that we think that matter for serious investors,” according to S&P Dow Jones Indices CEO Kathy Clay. “What we’re trying to bring are the same sort of principles that we have in our equity indexes into digital assets,” she said in an interview with CNBC.
WHY THIS MATTERS TO CRYPTO
Bitcoin is by far the most recognizable cryptocurrency in the world and has been embraced by Wall Street. So the fact that a new benchmark from a major index provider focuses on lesser-known but crypto-popular tokens is a big deal for the industry because funds that start tracking it would buy those coins.
Other high-profile benchmark indexes aim to represent the broader crypto market and end up bitcoin-heavy. For example, the Nasdaq CME Crypto Index has a near 77% weighting in bitcoin, and a 13% weighting in the next largest, ether. The FTSE Digital Asset All Cap Index similarly has bitcoin at a 75% weighting. That would make sense because the cryptocurrency’s market cap accounts for roughly 57% of the total market, per CoinGecko.
The S&P Pantera Digital Asset Index said it looks beyond bitcoin to what the index says are “assets underrepresented in traditional crypto strategies,” per the index’s brochure.
“Bitcoin is not in there because it’s really not one of those revenue generating protocols that we think belongs in this index and meets all of the criteria,” Clay said.
Bitcoin doesn’t qualify, in part, because that’s not how it works. Newly minted coins go to bitcoin miners as compensation for securing the network, but the cryptocurrency’s price isn’t driven by how much activity is occurring on that blockchain.
The top five constituents in the S&P Pantera Digital Asset Index are ether, bnb, sol, tronix, and hype, representing Ethereum, BNB Chain, Solana, Tron, and Hyperliquid, which generate revenue from activity on their respective blockchains. In other words, the new benchmark index is effectively tracking which chains are seeing traction.