Coinbase Shares Could See $16B of Buying Pressure From S&P 500 Index Inclusion: Bernstein

Coinbase’s Inclusion in the S&P 500: A Market Analysis

Coinbase Global, Inc. (COIN), a leading cryptocurrency exchange, experienced a significant surge in its stock price, soaring approximately 16% in early Tuesday trading. This sharp increase followed Monday evening’s announcement of its inclusion in the prestigious S&P 500 index, effective after market close on Friday. This marks a historic milestone, as Coinbase becomes the first and only cryptocurrency company to join this benchmark index.

The addition of Coinbase to the S&P 500 is anticipated to generate substantial buying pressure, estimated by Bernstein, a Wall Street brokerage firm, to reach approximately $16 billion. This figure is comprised of an estimated $9 billion from passive funds tracking the S&P 500 and an additional $7 billion from active fund allocations. Bernstein analysts, led by Gautam Chhugani, maintain an “outperform” rating on Coinbase shares, projecting a price target of $310—representing a potential upside of roughly 30% from the current price of around $240.

KBW, another prominent investment bank, provides further insight into the market mechanics driving this surge. Their analysis indicates that passive S&P 500 funds will need to acquire approximately 36 million Coinbase shares to reflect the index inclusion. This volume represents roughly four days of average trading volume for the stock, suggesting a significant influx of demand. KBW also highlights the presence of 9.9 million Coinbase shares currently held short, equivalent to approximately 1.4 days of short covering. This short interest adds to the potential for upward pressure on the stock price.

Historically, companies added to the S&P 500 have demonstrated positive post-announcement performance. KBW cites data indicating that since 2017, companies added to the index have outperformed the market by 5.2% on the day following the announcement. This historical trend suggests that Coinbase’s inclusion could be a catalyst for further gains. Moreover, this landmark event could pave the way for other cryptocurrency firms to gain entry into the S&P 500, potentially reshaping the index’s composition and further solidifying the cryptocurrency industry’s position within the mainstream financial market.