Solana
GSR Predicts 9x Price Rise for Solana Following Potential ETF Approval
- The price of Solana (SOL) is expected to hit $1,300 once the SEC approves a Solana cash exchange-traded fund (ETF).
- According to a GSR report, only Bitcoin (BTC) and Ethereum (ETH) currently meet the basic requirements for spot ETF consideration; however, a pro-crypto president could change the possibilities.
Solana (SOL) recently became a topic of discussion after VanEck’s head of digital assets research, Matthew Sigel, announced that the asset manager had officially filed the first-ever Solana spot ETF with the Securities and Exchange Commission (SEC ) the United States.
A little after, Crypto News Flash also reported Digital asset manager 3iQ filed for the same ETF product on the Toronto Stock Exchange (TSE) in Canada, sparking interest and driving up the price for a possible upside. While the chances of approval are up for debate, renowned market maker GSR has released a comprehensive study report titled “Is Solana Next?” to analyze all the possibilities of approval and the subsequent impact on the SOL price.
In the report, the evolution of the Solana network was praised, with nearly 300 billion transactions and over $4 billion in total value locked (TVL) attributed to its very low transaction cost, its large number of decentralized applications, and its growing user base and developer communities.
Key characteristics that qualify an asset for an ETF
In subjecting the potential approval of the Solana spot ETF to critical review, the GSR report explains that authorities expect the underlying assets to have a federally regulated futures market, which has existed for several years, and an ETF based on futures contracts. With this, alone Bitcoin (BTC) and Ethereum (ETH) would tick the boxes. This implies that there might not be any other ETFs anytime soon. However, things could change once a crypto-friendly president is elected.
The report also mentions that the level of decentralization and potential demand are the two main determinants of the next spot ETF. For the demand analysis, issuers should consider various indicators, including market indicators, assets under management (AUM) of existing products and activity metrics. After their analysis, GSR observed that EthereumSolana and NEAR are the only crypto projects with above-average scores.
When it comes to decentralization scores, Ethereum, Solana, Avalanche (AVAX), and APT reportedly scored higher. Unfortunately, the SEC has already flagged most of the assets on the lists, including ADA, SOL, NEAR, ATOM, and XRP, as securities.
What is the potential impact of the Spot Solana ETF on the SOL price
Our review of the GSR report observes three key scenarios that could play out once the SEC approves the Solana spot ETF.
First, there could be a bearish scenario. According to the report, the AUM of the global investment product Solana is 2% of that of Bitcoin. This implies that the potential ETF inflow could be relatively minimal.
The second scenario is the bullish case. With this, GSR used Solana inflows from 2021 to 2023. Over the past three years, Solana investment products have gained 5% of cumulative inflows relative to Bitcoin inflows. The researchers consider this to be 5% of their base case. The last scenario is the blue sky scenario. Here, Solana’s relative inflows would be 31% and 9% of Bitcoin inflows in 2022 and 2023, respectively. According to the researchers, Solana may not keep pace with Bitcoin’s exceptional inflows from 2021 to 2024. However, its average annual relative inflow of 14% is considered a potential blue sky scenario.
In the bearish scenario, GSR expects SOL price to increase by 1.4x. In the baseline scenario, SOL price is expected to increase by 3.4x. Finally, the price is expected to increase by 8.9x in the blue sky scenario. This implies that SOL price could reach $1,305 after the approval of a related cash ETF.
At press time, SOL was trading at $144, having fallen 2.9% over the past 24 hours.
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