Solana
Spot Solana ETF Speculation Spikes
solana cryptocurrency
Discussions about the next potential spot cryptocurrency ETF have increased on social media platform X.
After the debut of spot bitcoin ETFs in January and the likely imminent launch of spot ether ETFs this summer, investors are wondering if Solana exchange-traded funds will be next.
The fifth most valuable cryptocurrency by market capitalization after bitcoin and ether – and arguably the third most popular – SOL is the native cryptocurrency of the Solana blockchain.
Its market capitalization is currently $74 billion, compared to $1.4 trillion for bitcoin and $442 billion for ether. But despite its small size, SOL has an enthusiastic investor base that believes Solana will play a major role in the future of crypto.
Solana vs Ethereum: SOL headwinds
Solana is a smart contract platform that offers similar functionality to Ethereum. But while Ethereum prioritizes decentralization, Solana prioritizes speed and cost-effectiveness.
This is a legitimate project and SOL has potential as an investment, but there is a much steeper hill to climb. SOL ETF compared to Bitcoin and Ether spot ETFs.
The biggest obstacle is the lack of regulated futures contracts for SOL.
Futures contracts linked to bitcoin and ether are available on the CME, the world’s largest futures exchange. And these contracts were instrumental in getting the SEC to approve ETFs linked to these cryptocurrencies.
No such futures contracts exist for SOL today, and the CME has no plans to list them anytime soon, according to industry sources.
GSOL gauge on the potential of the SOL ETF
It is conceivable that at some point SOL Futures and SOL ETFs will be available for trading, but that day is still a long way off.
One way to assess the likelihood of SOL exchange-traded funds is to look at how well the market price of Grayscale Solana Trust (GSOL) is trading relative to its NAV.
Last year, analyzing the discount movements on the Grayscale Bitcoin Trust (GBTC) was a handy way to find out investors’ collective view on the chances of a spot Bitcoin ETF.
When this discount began to narrow significantly, it indicated that the unveiling of a spot Bitcoin ETF was increasingly likely.
Similarly, when the discount on the Grayscale Ethereum Trust narrowed significantly, from 24% to less than 2%, last May, it suggested that ether spot ETFs were imminent.
GSOL is different from GBTC and ETHE in that it does not trade at a discount to NAV. On the contrary, it is currently trading at a massive 633% premium!
The premium may reflect the fact that there are relatively few shares outstanding for GSOL – just 1.25 million – compared to 310 million for ETHE.
The story continues
Even though GSOL’s share count is growing through private placements, it is growing slowly.
The huge premium is a result of GSOL’s low share count and high demand.
Yet, if and when SOL ETFs become possible, this premium is expected to collapse.
Of course, it’s possible that it could decline even without any new ETF developments, making it an imperfect indicator of the likelihood of a SOL ETF.
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