Robinhood‘s S&P 500 debut extends crypto’s reach to index investors

Robinhood joins Coinbase in the S&P 500, expanding crypto access for index funds, pensions and institutions amid rising institutional interest.

Robinhood Markets will officially join the S&P 500 on Sept. 22, replacing Caesars Entertainment, as part of the quarterly rebalancing of the index.

The inclusion, announced by S&P Dow Jones Indices on Friday, brings another crypto-adjacent company to America‘s most tracked stock index, further expanding the benchmark index’s exposure to the crypto sector.

“This movement expands the indexs exposure and connection to the digital asset economy,” Edwin Mata, co-founder and CEO of tokenization platform Brickken, told Cointelegraph.

“While the S&P still lacks direct holdings in cryptocurrencies, Robinhood‘s role as a retail crypto gateway means the index is indirectly capturing part of the sector’s growth value and liquidity,” Mata added.

Robinhood shares have been on a tear since the S&P 500 inclusion announcement. Source: Google Finance

Robinhood, Coinbase give S&P 500 a crypto edge

Robinhood joins Coinbase, which was added to the S&P 500 in May, as one of two crypto-facing firms currently included in the index. Both operate as key access points to digital assets, exposing the index and, by extension, passive investors to crypto.

“So the addition of Robinhood to the S&P 500 shows that crypto-related businesses are now considered strong pillars of Americas market,” said Agne Linge, head of growth at decentralized onchain bank WeFi.

Following Robinhoods joining the S&P 500, all index funds and exchange-traded funds (ETFs) tracking the benchmark are required to add HOOD to their holdings, bringing a surge of passive capital into the stock. However, it might also introduce added volatility for the index.

“The inclusion of both of these stocks that have exposure to crypto increases some risk — a marginal risk — to the S&P 500 because both of these stocks have high beta values: 2.89 in the case of Coinbase and 2.36 in the case of Robinhood,” Linge said.

Beta is a measure of an investments volatility or systematic risk relative to the overall market. While higher beta values suggest greater volatility, Linge said the tradeoff could benefit long-term index holders.

“It also gives great exposure to normal people who only bought index funds playing safe, to pension funds, and of course to institutions who now can get comfortable with crypto exposure through one of the main basic investment tools such as the S&P 500,” Linge added.

Jim Cramer is bullish on Robinhood

Meanwhile, CNBCs Jim Cramer praised Robinhood following its addition to the S&P 500, calling it a “juggernaut” that has changed the retail brokerage landscape.

He also mentioned the company‘s continued expansion, from stocks, options and crypto into retirement accounts and credit cards. He called the firm a rare disruptor that Wall Street underestimated but now can’t ignore. “It just came out of nowhere, and its killing it,” he said.