S&P Global is set to launch a digital asset index, and XRP may be included! Can the index effect reshape the supply and demand dynamics of XRP?

S&P Global announced plans to launch the S&P Digital Markets 50 Index, which is a comprehensive Benchmark index that combines 15 types of encryption and 35 listed crypto-related stocks. The index is developed by S&P Dow Jones Indices in collaboration with Dinari, which will issue Tokens tracking this Benchmark on its dShares platform. Due to XRP's fifth largest crypto assets market capitalization and the signals from Spot ETF approval, its inclusion in the index has attracted market attention. Analyzing the historical index fluctuation effects, if XRP is successfully included, it could trigger forced buy-ins and price rises in the short term, while improving its market microstructure in the long term and enhancing its appeal to institutional investors.

S&P New Digital Market Index: A Hybrid Benchmark of Crypto Assets and Stocks

The S&P Digital Markets 50 Index aims to provide a cross-asset class digital market performance Benchmark, reflecting the growing recognition and integration of Crypto Assets by traditional financial institutions.

· Index Composition: The index will combine 15 Crypto Assets and 35 publicly traded crypto-related stocks. The stock portion covers companies in the fields of digital asset operations, infrastructure, financial services, and blockchain applications.

· Index issuance: S&P Dow Jones Indices has collaborated with Dinari to develop a Token that tracks the Benchmark on the dShares platform, allowing investors to track the index through tokenized products.

· Methodology details: Preliminary details show that the index will set a 5% cap on individual components and require a minimum market capitalization of approximately 100 million USD for stocks and approximately 300 million USD for Crypto Assets.

Analysis of XRP Inclusion Probability: Highly Correlated with ETF Approval Process

As a leading altcoin by market capitalization, the probability of XRP being included in the index is closely linked to the easing of the regulatory environment in the United States and the timeline for ETF approvals.

· Market capitalization advantage: XRP is the fifth largest crypto asset (by market capitalization), which gives it a natural competitive edge in the crypto asset sector.

· Regulatory signal: On September 17, the US SEC approved general listing standards for crypto-related ETFs, laying the foundation for the issuance of non-mainstream coin ETFs.

· ETF Prospects: Bloomberg's senior ETF analyst Eric Balchunas pointed out that the approval of non-mainstream coin ETFs is just a matter of time. There are signals indicating that once the U.S. government shutdown ends, a wave of approvals for non-mainstream coin ETFs will arrive, with XRP being one of the most likely candidates to be approved.

· Timing Fit: The alignment of the ETF approval time with the index launch time will greatly enhance the persuasiveness of including XRP in the index.

Mechanism of the Index Effect: Short-Term Forced Buying and Long-Term Liquidity Improvement

Research shows that inclusion in major indices can have a reliable impact on the trading microstructure of assets.

· Short-term price pressure: If XRP is included in the S&P Digital Markets 50 Index, it will trigger mandatory purchases from index trackers and tokenized products. They need to establish XRP positions before the effective date, thereby creating buying pressure in the short term.

· Periodic demand: The 5% component stock cap and the quarterly rebalancing mechanism will create a regular demand for XRP.

· Historical experience reference:

· Early S&P 500 effect: Classic studies have found that newly added components to the S&P 500 experience a price jump on the announcement day and have huge trading volume before the effective date, mainly due to the mandatory purchases by index funds.

· Contemporary effect weakening: A 2023 study by Harvard University indicates that as market efficiency increases and the predictability of fluctuations strengthens, the average abnormal return of the S&P 500 has approached zero.

· Global Index Impact: On the day of announcements amidst changes in global indices such as MSCI, significant positive abnormal returns are still observed, reflecting temporary price pressure brought about by mechanical capital flows.

· Tesla Case: In December 2020, Tesla's inclusion in the S&P 500 triggered tens of billions of dollars in index buying, accompanied by massive trading volume and price volatility.

· Long-term impact: After being included in the index, liquidity will improve, the bid-ask spreads will compress, and market depth will increase.

Conclusion

The launch of the S&P Digital Markets 50 Index is another milestone in the integration of traditional finance and the crypto market. If XRP is successfully included, it could not only benefit from the price premium brought by the mandatory buying of index tracking funds in the short term, but more importantly, it will gain the endorsement of the S&P benchmark, thus increasing its appeal to retail and institutional investors, expanding its investor base, and improving market depth in the long term. In the context of the approaching wave of ETF approvals, the time window and potential impact of XRP's inclusion in the index are worth continuous follow.

Disclaimer: This article is for news information only and does not constitute any investment advice. The crypto market is highly volatile, and investors should make cautious decisions.