Dow Jones Launching Crypto Indexes in 2021: Is this the Adoption We Wanted?

The crypto space is buzzing with another major mainstream development. S&P Dow Jones Indexes, a division of financial data service provider S&P Global Inc is all set to launch its cryptocurrency Indexes in 2021. Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indexes, says, “With digital assets such as cryptocurrencies becoming a rapidly emerging asset class, the time is right for independent, reliable and user-friendly benchmarks.”

Dow Jones will be the latest financial company joining the bandwagon lined up to reap the early-adopter benefits of entering the nascent asset class. The Dow Jones products will be using data from the virtual currency company Lukka based in New York to introduce customized indices and other such benchmarking tools on digital currencies. 

Lukka will be providing the data on more than 550 of the top-traded cryptocurrencies to S&P for the Dow-Jones branded products. The firm declined to share how it intends to stack up against its competitors but posits that the ‘partners’ institutional quality’ would prove to be a gamechanger to combine their efforts for a ‘market-leading offering’.

Roffman further elaborated, “We’ve been watching [the digital asset space], and we feel it’s at a point of institutional interest in maturity, where companies such as ours want to get in and contribute to the transparency of the marketplace.” 

S&P and Lukka, with this collaboration, hope to ease up access to the new asset class via more reliable pricing. Ass we see, this move is hugely expected to bolster mainstream adoption of cryptocurrencies in the future.   

Dow Jones isn’t the First: The Past Trends

As a crypto enthusiast, you must be aware that there have been innumerable instances in the past where investors, indices, exchanges, and institutions have been downright clear about their stance on the future potential of Bitcoin and Blockchain tech. Some of the major investments include: 

  • Wall Street already lists several cryptocurrency indices for investors to trade in and is expected to dominate cryptocurrency trading in the future. 
  • Bloomberg Galaxy Crypto Index has been providing quotes on highly liquid cryptocurrencies since 2018.
  • The tech-heavy exchange Nasdaq has listed many crypto indexes in the past few years. 
  • Large financial institutions such as JP Morgan intend to adopt a bullish-view towards Bitcoin in the medium term and long term. It is soon going to launch the first US bank-backed currency.  
  • CBOE global market is all set to launch a suite of tools replete with crypto indexes, historical data, and real-time ticks in a licensing partnership with execution provider CoinRoutes.
  • Paypal, the payment processing giant, has taken prominent steps to include cryptocurrencies within their portfolio. They announced their official support for Bitcoin, Ethereum, Bitcoin Cash, and Litecoin on October 21, 2020. The Paypal CEO, Dan Schulman, also revealed his plans for increasing crypto-asset purchasing limits.
  • Deutsche Bank spoke in favor of Bitcoin, calling it a ‘credible asset to invest in.’

What can be the possible impacts on the price of Bitcoin and other cryptocurrencies?

Bitcoin continues its bull run against the dollar as 2020 approaches its close. The prices saw a 170% increase since last year. Bitcoin surpassed the $20,000 mark and stood at $23,560 on 17th December! The magnanimous ascent of Bitcoin can be credited to major financial companies’ alignment towards the blockchain behemoth. At WazirX, we couldn’t be happier!

Such a significant move by well-known index providers, coming in the wake of the pandemic crisis, is proving to be an elixir for Bitcoin and other cryptocurrencies. Their prices continue to soar, pushed forward by increased investor interest. Investors are finding Bitcoin and its peers a safe haven asset providing the necessary hedge against inflation.

What can adoption enthusiasts and maximalists expect from the development?

The possibilities for cryptocurrencies and blockchain that exist in the near future are infinite, given the spiking investor interest and adoption by well-known indices. Here you go:

#1. Mainstream Adoption: Cryptocurrencies will soon become mainstream investments as we see the world’s most well-known index providers adopting cryptocurrency indices. Investor interest continues on the upstream, with channels of demand and adoption finding the digital currency as a perfect foil against traditional inflationary assets.

#2. Sanitized Payment Solutions: Post-pandemic, contactless payment solutions are in demand. Online platforms could see a possible solution in cryptocurrencies as more and more institutions and investors find themselves trusting digital coins and blockchain-based solutions. 

#3. Bitcoin Derivatives: Derivatives – such as futures and options – help investors hedge their positions against market volatility. With Bitcoin and other cryptocurrencies gaining the trust of popular indices and exchanges, trading in Bitcoin and other crypto derivatives is on the rise in the traditional financial markets as well. 

#4. Reliable Pricing: With mainstream adoption, Bitcoin and cryptocurrencies may come under the regulatory scanner and even move towards more reliable market operations and pricing. Volatility and speculation may tone down further as financial companies continue their adoption stint.   

#5. Institutional Investors’ Affinity: Large firms like Japan’s Nomura Holdings Inc and Fidelity Investments have already taken it upon themselves to hold Bitcoin and other cryptocurrencies for institutional investors. Well-known hedge fund managers Paul Tudor Jones and Stanley Drucker include Bitcoin in their Broad investment strategies. As cryptocurrencies gain mainstream momentum, the asset class would become better accessible to institutional investors. 

#6. Blockchain Capitalization: Experts are calling S&P’s entrance into the crypto-indexing sphere as the first step towards capitalizing further on Blockchain and crypto space. S&P is already on a recruitment drive to hire blockchain engineers for the past months.  

Sans any frills, we can conclude that the coming product from the index major is all set to become a ‘hub for cryptocurrency pricing data’ as Wall Street investors continue their search for cryptos further. Bitcoin (and its peers, of course) seems to have finally bit the gold. The disruption is all set to go mainstream!

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