Solana
Solana Spot ETF Fails to Maintain Momentum
Crypto data platform Kaiko recently announced that the introduction of spot Solana Exchange traded funds (ETFs) did not have a significant impact on the market.
Despite initial enthusiasm and a brief price spike, Solana (GROUND) market dynamics quickly returned to their previous state, reflecting skepticism and regulatory challenges.
Solana’s Brief Rise: Investors’ Hopes Fade Fast Despite ETF News
June 27, VanEck Files First Solana ETF Application with the United States Securities and Exchange Commission (SEC). A 21Shares Deposit followed on June 28.
These deposits initially sparked excitement, causing Solana’s price to surge 6%. However, Kaiko reveals that the impact was fleeting and market momentum quickly returned to its previous state.
Learn more: Crypto ETN vs. Crypto ETF: What’s the Difference?
“The deposits provided a temporary boost to market sentiment, which had been dampened by fears of a selloff due to Mt. Gox repayments,” the report said.
This temporary change was reflected in Solana’s cumulative volume delta (CVD) data, which measures net purchases and sales of cryptocurrencies. According to Kaiko, Solana saw a net positive CVD of $29 million over the past week, primarily due to increased spot purchases on Coinbase.
Solana’s cardiovascular disease. Source: Kaiko
Additionally, Kaiko’s analysis suggests that investor expectations for the Solana spot ETF were not as high as for other cryptocurrencies like Ethereum (ETH). Solana, often called the “Ethereum killer,” has struggled to maintain its momentum.
A comparative analysis with Ethereum highlighted this divergence. Ethereum Spot ETF Receives Partial Approval On May 23, its price showed a more sustained upward trend than Solana.
Kaiko also noted that the impact of the Solana ETF news on the derivatives market was limited. While there was a brief increase in the volume-weighted funding ratio of the SOL token on June 27, it quickly returned to neutral levels. Open interest remained virtually unchanged and was 20% below its early June levels, highlighting the lack of sustained bullish demand.
Solana Ecosystem Continues to Expand Despite Regulatory Doubts
One possible explanation for the weak market reaction could be skepticism towards Solana Spot ETF Approval ChancesUnlike Bitcoin and Ethereum, Solana has less accumulated data from the derivatives market, making it difficult to convince regulators of its price stability and resistance to manipulation.
Kaiko cited these regulatory hurdles as a major factor. Industry experts share Kaiko’s cautious outlook. ETF analyst James Seyffart of Bloomberg Intelligence noted that Solana’s Status as a Security could significantly hamper the approval process.
“Solana’s classification as a security “This represents a very bumpy road to ETF approval,” Seyffart noted.
Despite the challenges, the Solana ecosystem is seeing positive developments. Data from crypto exchange Bitget’s report shows that Solana’s decentralized finance (Challenge) has grown rapidly, with its total value locked (TVL) increasing from around $1.3 billion in early 2024 to around $4.5 billion by the end of June.
The Solana Foundation also continues to innovate. It recently expanded its ecosystem to include Solana mobile phones, SDKs, and the Newly Launched Solana Blinks.
“These products lay the foundation for Solana’s mass adoption, represent Solana’s adaptation to the growth of the mobile internet, and are essential to the continued growth of active addresses on-chain,” Ryan Lee, chief analyst at Bitget Research, told BeInCrypto.
Learn more: What is Solana (SOL)?
Nonetheless, the continued growth and innovation of the Solana ecosystem lays the foundation for potential future success. Additionally, as regulatory conditions evolve, Solana’s outlook could improve.
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