Overcoming Obstacles SOL ETFs Uphill Battle

Why is it difficult to wait for SOL ETF? Because it may not be profitable. Last week, Cathie Wood’s Ark Fund decided to withdraw its ETH ETF application. Although Ark’s BTC ETF ranks fourth (with a market share of 6%, behind BlackRock, Grayscale, and Fidelity), it is speculated to be “not very profitable”. This is mainly because the fees for BTC ETF are relatively low compared to traditional ETFs, with many in the range of 0.19-0.25%, and ETFs are also engaged in a “fee competition”. A simple estimate shows that with the current size of Ark’s BTC ETF, it can earn about $7 million in management fees per year, and the corresponding cost is also of the same order of magnitude. Therefore, if Ark’s BTC ETF is still hovering near the breakeven point, then pushing for ETH ETF may become a loss-making deal for Ark. Therefore, even for Ark, it can only reluctantly give up on ETH ETF. From a purely business perspective, for a mainstream coin with a lower market value, such as SOL, whose market value is only 5% of BTC, in order to recover the annual cost of $7 million, an ETF needs to manage at least 20 million SOL. Currently, BlackRock, the leader in crypto ETFs, only manages 1.5% of BTC on the entire network, while 20 million SOL means it accounts for 4.5% of SOL’s paper circulation. In addition, considering that: (1) SOL is naturally more difficult to raise than BTC, which has no yield. SOL’s on-chain yield can reach about 8%, but ETFs prohibit the inclusion of staking functions. Holding SOL ETF is equivalent to naturally losing 8% of on-chain SOL, while Bitcoin only loses 0.2% management fee. Taking Grayscale as an example, the peak of GBTC is 600,000 shares, while the peak of SOL is only 450,000 shares, which is seriously lower than BTC. (2) SOL’s paper circulation is 460 million, which may be much lower than this in reality, as everyone knows. A lower circulation market value requires larger positions to be held while facing high interest rates and regulatory pressures. Therefore, with SOL’s current market value and circulation, it is probably difficult for these institutions to make money. In business, who has the motivation to promote deals that don’t make money?