‘First they fight you, then add you to the S&P 500’: Coinbase could see $9 billion in passive inflows, Bernstein says

Coinbase will become the first pure-play crypto firm to join the S&P 500, the company confirmed late Monday — a move that could see billions of dollars in allocations to COIN, according to analysts at Bernstein.

“First they fight you, then add you to the S&P 500,” the analysts led by Gautam Chhugani said in a Tuesday note to clients — referencing a “dramatic turnaround” in fortunes and rising significance of Coinbase and the crypto industry in general. “Coinbase has gone from being in an intense litigation with the SEC just a few months back (later dropped by the SEC under the Trump regime) to being the latest addition to S&P 500,” they noted.

At its current market cap of approximately $52 billion, Coinbase would account for roughly 0.1% of the S&P 500, the stock market index tracking the financial performance of 500 leading companies, the analysts noted, and around 0.7% of its financial sector allocation. The S&P 500 currently has an aggregate value of around $52 trillion.

“We estimate $9 billion potential buying into Coinbase driven by passive S&P 500 linked ETFs and non-ETFs. Incrementally, for S&P benchmarked active funds, we estimate a ~0.1% allocation would lead to potential $7 billion of buying,” Chhugani wrote, noting that Coinbase’s stock generates around $1.5 billion in daily trading volume.

Van Eck Head of Digital Assets Research Matthew Sigel echoed Bernstein’s analysis in a post on X, stating, “The S&P 500 is the Bitcoin of stock indices: most trusted, most tracked, and the ultimate passive flows magnet. With at least $5T tracking it and assuming a ~0.2% weight, index funds will be buyers of ~$10B+ COIN.”

Bernstein has rated Coinbase stock as “outperform” since March, with a price target of $310 — implying a potential 36% upside — amid the Trump Administration’s aspiration to make America the “crypto capital of the world.”

While critics are concerned about Coinbase’s increasing competition and fee pressure, they overlook its total addressable market expansion due to the re-shoring of global crypto markets to the U.S., the analysts said at the time, describing it as the “great American homecoming.”

Coinbase is the largest U.S. crypto exchange with around 66% market share, over $400 billion in assets, and approximately 10 million active users, the analysts noted. It went public on April 14, 2021, through a direct listing on the Nasdaq.

With President Trump’s aspiration to make America the “crypto capital of the world,” including a Bitcoin Strategic Reserve, bank adoption of digital assets, and stablecoin and market structure regulations, Coinbase remains the dominant platform to “ride the tailwinds,” they reiterated on Tuesday.

Coinbase will replace Discover Financial Services in the benchmark index after the latter was acquired by Capital One in a $35.3 billion all-stock deal, which is expected to close on May 18. COIN’s S&P 500 listing will then take effect before trading on May 19.

‘Crypto is about to be in everyone’s 401k’

“As the saying goes… ‘First they ignore you. Then they laugh at you. Then they fight you. Then they add you to the S&P 500.’ …or something like that,” Coinbase posted on X following the announcement. “Thank you to everyone who made it possible for a crypto company to join the S&P 500 for the first time in history.”

“Crypto: welcome to the S&P 500!” Coinbase President and COO Emilie Choi said. “This is a big deal. The S&P 500 is arguably the most tracked and influential index in the world, is a 401(k) cornerstone, and a magnet for institutional capital. It’s a great day for Coinbase — our customers, employees, retail and institutional investors — thank you all for your hard work and support to get us here.”

That sentiment was mirrored by CEO Brian Armstrong, arguing it represents what those participants knew all along — that crypto is here to stay. “Crypto is about to be in everyone’s 401k,” he added. “My goal is that in 5-10 years, getting into the COIN50 index will feel as good as this.”

COIN jumped around 10% in after-hours trading on Monday following the news and is currently changing hands for $227.60 in pre-market trading on Tuesday, according to The Block’s Coinbase price page. However, the stock is down around 19% year-to-date and remains 34% below its all-time high of approximately $343.

Last week, Coinbase announced it had agreed to acquire Deribit in a record $2.9 billion deal for the crypto industry — consisting of $700 million in cash and 11 million shares of Coinbase Class A common stock. “This is an insanely great acquisition,” Bitwise CIO Matt Hougan said at the time. “Coinbase is going to be a $1 trillion company some day.”

However, the same day, Coinbase missed its Q1 revenue and earnings estimates as trading activity dipped 10% during the period. The crypto exchange reported $527 million in adjusted net income for Q1. Its total revenue of $2 billion was down from $2.3 billion in Q4, and first-quarter transaction revenue dipped 19% to $1.2 billion.

Gautam Chhugani maintains long positions in various cryptocurrencies. Certain affiliates of Bernstein act as market makers or liquidity providers in the equity securities of Coinbase.

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