On June 27th, VanEck announced that it has submitted an application for the VanEck Solana Trust to the U.S. Securities and Exchange Commission (SEC) for listing on the Cboe BZX Exchange. VanEck Digital Assets is the sponsor of the trust, and Delaware Trust Company is the trustee. Following the news, the price of SOL briefly surged past 150 USDT, experiencing a nearly 7% increase in just 30 minutes.
In the past month, after the approval of the Ethereum spot ETF, there has been speculation in the market about whether the next approved cryptocurrency ETF will be for SOL. On one hand, considering SOL’s market value and influence, some believe it’s SOL’s turn. On the other hand, given that the SEC previously classified SOL as an unregistered security, many investors believe the chances of a SOL ETF being approved are almost zero.
So, what is the reason behind VanEck’s submission of the SOL trust application? Additionally, last Friday, Canadian digital asset management company 3iQ submitted the first North American Solana ETP application. Will SOL really become the next approved cryptocurrency ETF?
Firstly, Matthew Sigel, the Director of Digital Asset Research at VanEck, believes that the combination of high throughput, low fees, strong security, and a vibrant community makes Solana an attractive ETF option, providing investors with a versatile and innovative open-source ecosystem. Furthermore, addressing the main obstacle to the approval of a SOL ETF, which is the nature of SOL as an asset, Matthew emphasizes that “SOL is a commodity.” He states that SOL’s decentralized nature, high utility, and economic viability align with the characteristics of other established digital commodities, reinforcing their belief in SOL as a valuable commodity.
In addition to VanEck’s perspective, market maker GSR also released a report expressing a bullish view on SOL after the official announcement. GSR believes that considering spot ETFs are the main driving factor for current cycle prices, and the partisan disputes resulting from the elections have led regulatory agencies to relax their stance on digital assets, the Digital Asset Market Structure Act defined by securities and commodity definitions could not only possibly happen but could even be a high probability event.
GSR believes that the two key factors determining the next cryptocurrency spot ETF include the level of decentralization and potential demand. GSR analyzed the decentralization scores and demand scores of eight cryptocurrencies and assessed the likelihood of their respective ETF approvals.
Firstly, GSR analyzed the level of decentralization of different blockchains based on the following three indicators:
1. Nakamoto Coefficient: Measures the minimum number of independent entities that could collude to attack the network. The larger the number, the higher the level of decentralization.
2. Staking Requirements: Measures the ease of participation in the network as a node operator or validator, including minimum staking and hardware requirements. The lower the staking and lighter the hardware, the higher the level of decentralization.
3. CCData Governance Rating: This rating includes various governance measures related to participation, transparency, and decentralization.
The results show that the four blockchains with decentralization scores higher than the average are Ethereum, Solana, Avalanche, and Aptos.
Regarding demand, GSR analyzed the following three categories of indicators and identified three blockchains with demand scores higher than the average: Ethereum, Solana, and NEAR.
1. Market Indicators: Higher market capitalization, trading volume, and stronger token performance indicate higher future demand.
2. Existing Product AUM (Assets Under Management): Higher global asset management scale of existing investment products for tokens indicates potential demand for spot ETF products.
3. Activity Indicators: A strong, active community and widespread usage also indicate future demand.
GSR believes that among these two factors, decentralization is more of a threshold factor, while potential demand is the main criterion used by issuers. Therefore, the scores of the two factors are calculated with weights of 33% and 67%, respectively. After adding the two scores together, GSR’s final result ranks Ethereum in the first position with a significant advantage, followed by Solana and NEAR. Compared to NEAR, SOL has a much larger gap in scores. Additionally, SOL is the only cryptocurrency, apart from ETH, that receives positive scores in both decentralization and demand.
In addition to analyzing the likelihood of approval, GSR also analyzed the potential impact of a Solana spot ETF on the price. By comparing SOL with Bitcoin in terms of global investment product inflows, GSR suggests that if a SOL ETF is approved, it could have a 1.4x increase in a bear market, a 3.4x increase in normal conditions, and an 8.9x increase in a bull market.
Although VanEck emphasizes that “SOL is a commodity” and GSR’s analysis is optimistic about the approval of a SOL ETF, many experts remain skeptical. Haseeb Qureshi, a partner at Dragonfly Capital, stated in an interview with The Block that it is not possible to achieve this; the SEC has clearly stated that SOL is a security. James Seyffart, an ETF expert at Bloomberg, shares the same view, stating that the fund may have a chance of launching sometime in 2025 only if there is a change in the White House and the SEC. Even then, it is not guaranteed.
Wintermute’s founder and CEO, Evgeny Gaevoy, jokingly referred to GSR as the legendary trader “GCR.” Evgeny explained his reasons for not being optimistic about the approval of a SOL ETF. He stated that the likelihood of a SOL ETF being approved this year is almost zero. It would be foolish to wishfully think that it would be prioritized by the Trump administration. Looking at the low inflows of the Ethereum ETF this year, even if a SOL ETF is approved, its inflows would be even lower. Evgeny added that Wintermute is also bullish on SOL and ETH, and his views are based on facts, stating that the adoption of cryptocurrencies takes time.
Furthermore, as pointed out by 0xTodd, one reason why a SOL ETF is unlikely to be approved is that it may not be profitable. 0xTodd explained his viewpoint by referring to Cathie Wood’s decision to withdraw the ETH ETF application. He stated that Cathie Wood’s BTC ETF has a high market share ranking fourth (6%, with the top three being BlackRock, Grayscale, and Fidelity), but it is “not very profitable.” This is because the fees for BTC ETFs are lower compared to traditional ETFs, and there is a “fee competition” among ETFs. Considering that
