Jessy,
On June 28th, Beijing time, VanEck launched the VanEck Solana Trust and submitted a Solana spot ETF application to the SEC.
Interestingly, this is the first time that a spot ETF application for SOL has been submitted, as there has not been an approved and listed futures ETF for SOL before. Is this just a publicity stunt for the Solana spot ETF application?
VanEck, the issuer of approved BTC and ETH spot ETFs in the United States, has now submitted a Solana spot ETF application to the SEC. Based on the statements made by the head of digital asset research at VanEck, it can be concluded that the reason for applying for a Solana spot ETF is mainly because they have high expectations for Solana’s technology and see its potential as a widely used digital commodity with a large customer base.
According to the application, the VanEck Solana Trust is expected to be listed for trading on the Cboe BZX Exchange, subject to issuance notice.
One interesting thing to note is that VanEck did not follow the usual process this time. Instead of applying for a futures ETF for SOL, they directly applied for a spot ETF. This may affect the approval process by the SEC. From this, it can be seen that the approval of the Solana spot ETF still has a lot of uncertainty. Another uncertainty is that the SEC has previously stated in a lawsuit that SOL is an unregistered security.
Other factors that may affect the SEC’s judgment on the Solana spot include its lack of decentralization. Solana’s decentralization is not as strong as Bitcoin and Ethereum, especially considering that FTX holds a large amount of Solana. Furthermore, its market capitalization is far behind Bitcoin and Ethereum, indicating poor liquidity.
Considering these factors, is VanEck’s application for the Solana spot ETF just a publicity stunt? In fact, it is not.
Institutional users’ support and a change in the US government may reverse the situation.
Firstly, Solana, as the dark horse of this bull market, has attracted a lot of attention and has been favored by Wall Street capital. Analysts point out that Solana’s high throughput, low transaction fees, and security make it a potential target for ETFs.
Why Solana instead of other coins? Previously, LTC, BCH, and DOGE were considered strong candidates for the next wave of spot ETFs. The reason is simple: the usual process for approving virtual currency spot ETFs is to first list the coin’s futures on the CFTC, then the futures ETF, and finally the spot ETF. Currently, besides BTC and ETH, only LTC, BCH, and DOGE have compliant futures listed after submitting the required documents to the CFTC. However, these three tokens are not traded on CME but on Coinbase’s derivatives exchange. Additionally, these three tokens have not been designated as securities by the SEC. Therefore, it is believed within the industry that the next spot ETFs to be approved may be for these three tokens.
However, we seem to have only focused on the compliance process and overlooked the important role of capital in spot ETFs.
Robbie Mitchnick, the head of digital assets at BlackRock, has clearly stated that the demand from institutional clients determines BlackRock’s advancement in cryptocurrency products. In other words, if institutional clients favor a certain token, these fund companies will vigorously promote the spot ETF for that token.
By analyzing the cryptocurrency-related ETNs (exchange-traded notes) issued by VanEck, it is found that the Solana ETN has the largest demand (asset management scale) after Bitcoin and Ethereum. This helps us understand why VanEck and other fund companies are actively pushing for the Solana spot ETF instead of tokens that appear to be more compliant in the process.
Although the launch of the Solana spot ETF currently faces significant uncertainty, there is a chance for its approval if there is a change in the leadership of the US government, especially with a SEC leadership that supports cryptocurrencies. The US presidential election is truly influencing the cryptocurrency market.
What will happen to the price of SOL if the Solana spot ETF is approved? GSR’s report evaluation suggests that in bear, baseline, and ideal market conditions, the proportion of funds flowing into the Solana spot ETF compared to Bitcoin could be 2%, 5%, and 14% respectively. Additionally, Solana’s market capitalization averaged 4% of Bitcoin’s market capitalization in the past year. Under bear market conditions, SOL could increase by 1.4 times, under baseline conditions it could grow by 3.4 times, and under ideal conditions it could grow by 8.9 times.
Perhaps next year, when the SEC has a new leadership team, the Solana spot ETF will be launched. But everything is unknown.
