Coinbase Joins S&P 500, Paving the Way for Major Buying Pressure
Crypto exchange Coinbase (COIN) surged 16% early Tuesday following the announcement on Monday evening that it would be included in the prestigious S&P 500 index.
Effective after the close of trading on Friday, Coinbase will replace Discover Financial Services (DFS) in the index, as DFS is being acquired by Capital One (COF).
According to Wall Street brokerage Bernstein, this move is expected to generate significant buying pressure for Coinbase, with an estimated $16 billion in demand. This includes approximately $9 billion from passive funds tracking the S&P 500 and an additional $7 billion from active fund allocations.
Coinbase stands as the “first and only crypto company to join the S&P 500,” analysts led by Gautam Chhugani stated. Chhugani maintains an outperform rating on Coinbase, with a price target of $310, implying an upside of roughly 30% from the current price of $240.
Investment bank KBW has projected that S&P 500 passive funds will need to purchase 36 million Coinbase shares to accommodate its inclusion, which equates to roughly four days of average trading volume.
Additionally, KBW highlighted that as of April 30, there were 9.9 million Coinbase shares held short, representing 1.4 days’ worth of shares to cover.
KBW also noted that companies added to the S&P 500 since 2017 have seen an average 5.2% gain on the day after the announcement, and Coinbase’s inclusion could open the door for other cryptocurrency firms to follow suit.
