Coinbase will join the S&P 500 index before the market opens on May 19

Coinbase (NASDAQ:COIN) will join the S&P 500 index ahead of the market open on May 19, marking a significant step for the cryptocurrency exchange.

What Happened: Coinbase will replace Discover Financial Services (NYSE:DFS) as part of the Capital One (NYSE:COF) merger with DFS. The integration will take effect at the beginning of the new trading day on Friday.

The listing in the S&P 500 comes as a major development for Coinbase, which debuted on the Nasdaq in 2021. The company has been increasingly straddling the traditional financial world — particularly as institutions and traditional finance express interest in the crypto space.

Coinbase at the time of the direct listing had a market capitalization of $52.78 billion, with shares closing Monday at $207.22. The stock is well below its 2021 peak, when it traded above $357.

The S&P 500 is composed of large-cap tech companies, but the index also features stocks from other parts of the tech world. In the past year, companies including Dell (NYSE:DELL), Palantir (NYSE:PLTR), Super Micro Computer (NASDAQ:SMCI), and CrowdStrike (NASDAQ:CRWD) were added to the index.

Related Link: Coinbase Integration In S&P 500 To Take Effect This Week: What To Know

Why It's Important: To be eligible for inclusion in the S&P 500, a company must report a profit in its most recent quarter and rack up total profits over the previous four quarters.

Coinbase has already met all of the criteria, reports CNBC. The company reported a profit of $65.6 million last quarter — but that’s way down from the $1.18 billion it made a year ago. Its revenue has still increased about 24% year-over-year to $2.03 billion.

"Coinbase is a large-cap stock with the liquidity and the interest to warrant inclusion in the S&P 500," Wolfe Research analyst Ben Phillips told CNBC. "It's also a stock that a lot of investors are watching closely as they try to get a read on the health of the broader tech sector."

The addition of Coinbase could bring new attention to the cryptocurrency sector, which has been battered by a series of high-profile bankruptcies and scandals in recent months.

"The crypto sector is still a relatively small part of the overall market, but it's an important and rapidly growing sector," Phillips said. "The inclusion of Coinbase in the S&P 500 could help to raise awareness of the sector and attract new investors."