DeFi
Is a Solana ETF next? Four industry experts weigh the odds – DL News
- The DeFi giant’s SOL token could be on deck with the Ethereum ETF poised to get the green light.
- Skeptics say a Solana futures ETF should probably come first.
- Ethereum ETF Approval Sparks Pre-Summer Rally.
As investors anticipate the approval of an Ethereum ETF in the United States on Thursday, all eyes are on the next cryptocurrency.
For many, there is an obvious candidate: Solana.
“You have to think of Solana as probably next,” said CNBC anchor Brian Kelly on Wednesday. “Bitcoin and Ethereum Solana are probably the big three in this cycle.”
It’s not a bad decision.
Joe McCann, CEO of crypto investment firm Ametric Finance and self-described Solana maxi, said SOL needed to be on deck given its stature in the market.
SOL is up more than 68% this year, according to CoinGecko. And with a market value exceeding $77 billion, Solana is the fifth largest cryptocurrency.
Juicy DeFi market
The advent of an Ethereum ETF four months after spot-price Bitcoin funds hit the market is boosting the DeFi market. Ether has surged 29% over the past seven days, which is about six times better than Bitcoin.
Solana, meanwhile, has done even better thanks to its judicious adoption of memecoins earlier this year and unorthodox initiatives like rolling out a new cell phone called chapter 2.
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“A Solana ETF similar to ETH vehicles should raise no reasonable objections.”
—Michael Cahill, Doura Labs
But the big story is how Wall Street powerhouses like BlackRock, who once ridiculed crypto, are now rushing to package cryptocurrencies into cheap, easy-to-trade exchange-traded funds.
Alongside BlackRock, Van Eck and Fidelity have applied to issue Ethereum ETFs. The U.S. Securities and Exchange Commission is expected to give the green light to the products on Thursday.
As a proof-of-stake token, much like Ether, Solana can benefit from regulators’ familiarity with the product design.
“Technically speaking, a Solana ETF that has non-staked characteristics similar to those of the ETH vehicles examined should raise no reasonable objections,” said Michael Cahill, CEO of Doura Labs. DL News.
“Given developer activity, I consider that a SOL ETF will have a quote above 75% this year and over 95% next year.”
Here again, the bulls may be getting a little carried away.
Polymarketthe prediction market closely followed by crypto investors, reports that a spot Solana ETF has a 7% chance of being approved in 2024.
The betting pool is also small, at just over $100,000. This indicates that the proposal is not attractive enough for speculators.
Solana futures?
Nate Geraci, co-founder of the ETF Institute and president of the ETF Store, is also pessimistic. At least not until the market sees Solana futures.
Long before the Bitcoin Spot ETF was approved, future contracts for Bitcoin were approved for trading on the Chicago Mercantile Exchange, one of the largest derivatives exchanges in the world. Likewise for Ethereum.
Geraci also said that before a Solana ETF can be approved, Congress must approve a clear regulatory framework for digital assets in the United States.
Radical legislation
Of course, spot price ETFs are typically marketed to retail investors, although institutions also make good use of them.
While regulators have long been reluctant to expose retail investors to crypto ETFs, a number of developments appear to be paving the way for altcoin funds.
On Wednesday, the United States House of Representatives passed the FIT21 bill, a sweeping piece of legislation aimed at governing digital asset markets. The bill garnered support from 71 Democrats, which is significant because the party has been less supportive of crypto in the past.
The bill still needs to pass the Senate, and President Biden has signaled he doesn’t like the legislation. The White House said it would work with Congress to develop a regulatory framework for the industry.
Is this enough to make Solana a real competitor?
Not for a while, say the skeptics. Then again, only a few months ago the prospect of an Ethereum ETF seemed the longest of prospects.
Liam Kelly is based in Berlin DL News’ corresponding. Contact him at liam@dlnews.com.