Here's 1 Big Clue About the Most Important Thing in the Next Crypto Bull Market
A new digital asset index launched by S&P Global and Pantera Capital excludes coins without financial fundamentals, offering a hint about which assets big money will buy and hold in the next crypto bull market.
Intelligence analysis by Llama
The S&P Pantera Digital Asset Index includes only tokens whose networks earn real revenue and route some of it to holders, excluding speculative or useless cryptocurrencies. This index could become a shopping list for institutions looking for quality assets to invest in during the next crypto bull market.
Imagine you have a lemonade stand. You charge people for lemonade, and the money you make goes into your pocket. Now, imagine a special kind of lemonade stand that not only makes money but also gives some of it back to the people who helped make it. That's kind of like what the S&P Pantera Digital Asset Index is looking for in cryptocurrencies. It wants to find coins that make money and give some of it back to their holders, making them more attractive to investors.
Analysis
A $60B Vote of Confidence
The S&P Pantera Digital Asset (SPPDA) Index is a new digital asset index launched by S&P Global and Pantera Capital. This index includes only tokens whose networks earn real revenue and route some of it to holders. The inclusion criteria require that some portion of incoming revenue be routed to reach holders, either through token buybacks, coin burns that shrink the outstanding supply, or staking rewards that deliver a yield above the dilution from the rate of new issuance.
The synthesis is that most of the cryptocurrencies featured in the index have real financial fundamentals, which makes owning them a bit closer to owning a productive asset, like a share of a business. For instance, Bitcoin exhibits plenty of transaction activity, but none of it returns to holders as revenue. Fees are routed to compensate miners instead of holders, so it isn't in the index. XRP, on the other hand, seems like it obviously should have qualified, at least before you look at the numbers. The reason why it didn't is that its fees are so low that even burning them outright has a negligible effect on the coin's supply. So, holders don't have much upside exposure based on activity on the chain.
Its exclusion is thus a big clue that assets without upside-providing mechanisms are likely to be disfavored from here on out. Nor do the rock-bottom fees generate enough protocol revenue to muscle out competitors for the limited number of slots in the index. In June, Solana brought in $1.5 million in chain revenue. The XRP Ledger (XRPL) only brought in $12,392 in the same period. Even growing its top line by 10X wouldn't be enough to qualify it for inclusion.
Why Cursor?
Having the index at hand means that institutional allocators won't have to sift through dead chains, meme coins, questionable decentralized finance (DeFi) tokens, and interesting-but-unproven projects while looking for quality. Since the index will likely eventually be turned into an exchange-traded fund (ETF), it may become a force in the industry, encouraging crypto projects to create structures that capture fees and pass at least some of them on to holders.
The Road Ahead
The next crypto bull market will be led by coins with strong protocol revenue and solid tokenomics for holders. Financial fundamentals, once eschewed in crypto, will become the most important attributes for investors to focus on. The alternatives, like hoping and praying that fundamentals-free cryptoassets will grow on narratives or hype, certainly don't look very appealing by comparison.
Key points
- The S&P Pantera Digital Asset Index includes only tokens whose networks earn real revenue and route some of it to holders.
- The index excludes coins without financial fundamentals, such as Bitcoin and XRP.
- The index could become a shopping list for institutions looking for quality assets to invest in during the next crypto bull market.
- Financial fundamentals, such as protocol revenue and tokenomics, will become the most important attributes for investors to focus on in the next crypto bull market.
The S&P Pantera Digital Asset Index could become a benchmark for institutional investors, encouraging crypto projects to create structures that capture fees and pass them on to holders. This could lead to a new wave of investment in cryptocurrencies with strong financial fundamentals, making them more attractive to investors.
The exclusion of XRP from the S&P Pantera Digital Asset Index suggests that assets without upside-providing mechanisms are likely to be disfavored in the next crypto bull market. This could lead to a decline in the value of XRP and other similar cryptocurrencies.
