In late July, S&P Global and Pantera Capital launched a new digital asset index based entirely on financial fundamentals. Two famous coins, Bitcoin and XRP, failed to qualify, while Ethereum (ETH -1.89%), Hyperliquid (HYPE +1.00%), and Solana (SOL -1.64%) were included, along with some of their peers.
It’s those divergent results that offer the clearest hint yet about which coins big money will want to buy and hold in the next crypto bull market.
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The clue is in what got left out
The S&P Pantera Digital Asset (SPPDA) Index includes only tokens whose networks earn real revenue and whose revenue is routed to holders. It’s aimed explicitly at financial institutions that need to have a sensible crypto benchmark that excludes the most speculative or useless cryptocurrencies.
Let’s back up for a moment to understand what that actually means. Blockchains charge their users transaction fees. Adding up those fees gives you the protocol revenue, which, in most senses, is the crypto version of revenue generated from sales of a pay-as-you-go service.
Unlike a plain crypto index weighted by market cap, the SPPDA index retains only names that meet a revenue threshold.
Today’s Change
(-1.89%) $-35.43
Current Price
$1,839.46
Key Data Points
Market Cap
Day’s Range
$1839.60 – $1894.64
52wk Range
$1512.07 – $4946.05
Volume
5.2B
However, clearing the bar alone isn’t enough to be included. 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.
This index could become a shopping list for institutions
The gist of the index’s inclusion criteria is that they are the factors institutional allocators will look for when they’re scouting for assets to invest in during the next crypto bull market.
Having the index at hand means that they 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.
Today’s Change
(-1.64%) $-1.20
Current Price
$72.15
Key Data Points
Market Cap
Day’s Range
$72.22 – $74.05
52wk Range
$60.40 – $252.78
Volume
946.8M
So, per the hints gleaned from the index, 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.