Can Block Inc. Be the First Bitcoin Hodler in the S&P 500?

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Srebrin Petrov
10 January, 2025, 06:47
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Could Block Become the First Bitcoin Hodler in the S&P 500?

Matthew Sigel, head of digital assets research at VanEck, has sparked interest in the cryptocurrency and traditional finance communities with his recent post on X (formerly Twitter). Sigel speculated that Block, Inc. (formerly Square), founded by Jack Dorsey, might become the first Bitcoin-holding company to be included in the S&P 500—the benchmark index for the U.S. stock market.

The Path to Inclusion: S&P 500 Criteria

To be considered for inclusion in the S&P 500, companies must meet six strict criteria:

Market Cap: Must exceed $18 billion.
Public Float: At least 10% of shares must be held by public investors.
Earnings: Positive GAAP earnings in the most recent quarter and cumulatively over the last four quarters.
Liquidity: Must demonstrate high liquidity.
IPO Seasoning: The company must have been publicly traded for more than 12 months.
U.S. Domicile: The company must be headquartered in the United States.

According to Sigel, Block has met these criteria, particularly following its Q1 2024 earnings report, which confirmed the company's positive earnings performance.

Block’s Bitcoin Investments and Role in the Sector

Block’s inclusion in the S&P 500 would be a significant milestone for both the company and the cryptocurrency industry. Block first demonstrated its commitment to Bitcoin in October 2020, purchasing $50 million worth of BTC, followed by an additional $170 million in February 2021.

CEO Jack Dorsey has long been a Bitcoin proponent, envisioning it as a key component of the future financial system. This alignment between Block’s financial success and its Bitcoin-centric vision could set a precedent for other crypto-friendly firms.

The Discretion of the S&P 500 Index Committee

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While meeting the criteria is necessary, it is not sufficient for automatic inclusion. The S&P 500 Index Committee has discretionary authority, considering additional factors such as:

Sector Diversification: Ensuring the index reflects the broader economy.
Market Stability: Evaluating the potential impact of including a company with unique or volatile assets, such as Bitcoin.

Historically, companies meeting the criteria are included within 3 to 21 months, although exceptions like Lululemon (LULU) have taken up to 65 months.

Competitors: MicroStrategy (MSTR) and Coinbase (COIN)

Other Bitcoin-heavy firms, such as MicroStrategy (MSTR) and Coinbase (COIN), have been subjects of similar speculation. However, their paths to the S&P 500 face unique challenges:

MicroStrategy (MSTR): While recently added to the Nasdaq-100, its heavy reliance on Bitcoin as a treasury asset makes it unlikely for inclusion in the S&P 500. Bloomberg’s Eric Balchunas speculated that the committee may avoid MSTR, citing its atypical business model.
Coinbase (COIN): Despite meeting the inclusion criteria, its direct exposure to the cryptocurrency market makes it a “controversial pick,” according to Sigel. The committee may hesitate due to the regulatory uncertainties surrounding crypto exchanges.

What’s Next for Block and the S&P 500?

If Block secures a spot in the S&P 500, it would mark a significant step for cryptocurrency adoption in mainstream finance. However, its inclusion may depend on the Index Committee’s willingness to embrace a company with direct Bitcoin holdings.

For now, Block's position as a Bitcoin pioneer in the traditional finance space strengthens its case. As Sigel noted, sector diversification and alignment with the broader economy could be deciding factors.

Conclusion

Block's potential inclusion in the S&P 500 underscores the growing intersection between traditional finance and cryptocurrency. If successful, this could pave the way for other Bitcoin-forward companies to join the index, potentially reshaping how the market perceives digital assets within the broader economy.