Will Coinbase gain more currency following its addition to S&P 500 index?

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Cryptocurrency has gone through booms and busts since Satoshi Nakamoto introduced bitcoin, the pioneering digital currency, to the world in 2008. Digital currencies, with their proclivity to attract hackers and facilitate money laundering, have received a lot of bad publicity. With the addition of Coinbase Global, Inc. (NASDAQ:COIN) to the S&P 500 index earlier this month (replacing Discover Financial Services which has been acquired by Capital One Financial) it seems the tide is turning and cryptocurrencies are now gaining more currency.

For one, Coinbase is the first cryptocurrency platform to be added to the leading market index. This means index funds that mirror the S&P 500 will have to add the stock to their holdings, creating more demand for Coinbase stock. And if your retirement accounts include S&P 500 index funds, you will also willy nilly be exposed to crypto. Crypto also gained wider investor acceptance in January 2024 after the Securities and Exchange Commission approved bitcoin-tied Exchange Traded Funds. The regulatory authority however cautioned about the risks of the cryptocurrency.

Cryptocurrencies have been gaining recently, benefiting from President Trump’s positive views about the digital currencies, including the promotion of his own meme coin. This year, bitcoin had gained more than 8% as of early May, crossing the $100,000 mark per token. The SEC has also taken a lighter regulatory stance towards the cryptocurrency sector in the Trump administration, in contrast to ex-SEC Chair Gary Gensler’s tougher approach. And the president has also promoted the idea of building strategic bitcoin reserves.

This sort of rising acceptance and legitimization of cryptocurrency doesn’t mean that the negative aspects of digital currency are done with though. In fact, Coinbase recently experienced a data breachthat put at risk the information of some of its customers and could subject the company to a loss of as much as $400 million.

The company serves as a platform that connects users to blockchain-enabled cryptocurrency and allows them to invest in or trade crypto and use their crypto assets in activities facilitated by decentralized applications. Consumers can use the platform as an account for their cryptocurrency, while it can serve as a brokerage platform for institutions and provide developers access to develop blockchain-based products and services, including decentralized applications. Coinbase reported that the value of crypto assets it held or managed on behalf of customers on its platform at the end of March was more than $327 billion.

Founded in 2012 by its Chief Executive Officer Brian Armstrong, together with Fred Ehrsam, the crypto trading platform publicly listed its shares in April 2021. On the first day of trading, its shares, initially offered at $250, rose as high as $429 and closed at about $328. And following the announcement of its S&P 500 addition, the stock gained more than 25% in May, closing at about $263 on May 23. Looking ahead, will Coinbase rise above all the negative publicity and volatility associated with cryptocurrency and continue to gain currency in future?