S&P Dow Jones Launches Bitcoin, Ethereum Indices Amid Crypto Surge

Index provider S&P Dow Jones launched its cryptocurrency indices Tuesday, with three benchmarks pegged to Bitcoin and Ethereum prices.
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S&P Dow Jones launched a series of cryptocurrency indices Tuesday based on Bitcoin and Ethereum prices, with plans for a broader selection of digital coins and assets later in the year.

The S&P Bitcoin Index will measure performance of the world's biggest cryptocurrency, S&P Dow Jones said, with an S&P Ethereum Index designed to track Ether, the digital token used for transactions on the Ethereum blockchain. A third index, the S&P Cryptocurrency MegaCap Index, will measure the performance of both Bitcoin and Ethereum digital assets.

The indices will use price data from Lukka, a crypto software and data provider, as part of the determining process, with the aim of creating a digital market that will "mitigate some of the common risks associated with this traditionally speculative 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."

"We look forward to further expanding our new family of Digital Market Indices and bringing much needed transparency to this exciting market," he added.

Bitcoin prices were marked 2.25% lower on the session at $56,220 each, but have risen more than 93% so far this year, and is more than six times higher than it was in May of 2020.

The Grayscale Bitcoin Trust  (GBTC) - Get Report, the cryptocurrency's biggest trust provider and a benchmark for tracking institutional investor activity, is up 47% so far this year and has a market value of more than $32.7 billion. 

Ethereum, meanwhile, had its biggest single-day gain on record yesterday when it reached an all-time high of $3,457 each, cryptocurrency's year-to-date gain at around 350%.

Bitcoin's mainstream adoption has also paralleled its extraordinary price increase, with PayPal unveiling plans last month that will allow its customers the ability to buy goods and services with cryptocurrencies at more than 29 million merchants around the world in what may be the biggest single effort to normalize digital purchases.

Bitcoin's use in goods and services transactions remains remarkably small, however, with a 2018 study suggesting monthly volumes of less than $60 million.

The heavy environmental cost of bitcoin's complicated settlement procedure is also a factor in its slow transaction processing speed, a recent study from Bank of America noted, with just 14,000 transactions per hour. Visa V, by contrast, processes more than 236 million each hour.

Still, with companies such as Tesla TSLA, Square SQ and Twitter TWTR adding to their bitcoin investments and retail investors pouring into to the cryptocurrency world at a record pace, JPMorgan's decision to facilitate its client's interests does make commercial sense.