The approval of spot Solana exchange-traded funds (ETFs) in the United States could potentially catapult the price of SOL by ninefold, according to a recent report from crypto market maker GSR Markets. Released on June 27, the report positions Solana as one of “crypto’s big three” and explores its potential as the next cryptocurrency to receive regulatory approval for a spot ETF in the US.
This prediction comes amid VanEck’s unexpected filing to launch a spot Solana ETF, signaling significant interest in the asset.
Potential Inflows from Bitcoin ETFs
GSR Markets, which currently holds a long position on SOL, estimated an “8.9x” increase in Solana’s price based on the assumption that spot Solana ETFs would attract 14% of the flows seen by spot Bitcoin ETFs since their January launch. This calculation, considering Solana’s current market capitalization, suggests a price surge from $149 to over $1,320, resulting in a market capitalization of $614 billion.
The report also outlined more conservative scenarios: in a “bear” scenario, capturing 2% of Bitcoin’s flows would increase Solana’s price by 1.4x, and in a “baseline” scenario, capturing 5% of the flows would result in a 3.4x increase.
GSR noted that these projections could be even higher if spot Solana ETFs included income from staking rewards, though staking was not allowed in the recently approved spot Ether ETFs.
Regulatory and Market Challenges
Despite GSR’s optimism, Bloomberg ETF analyst Eric Balchunas and others suggest that significant regulatory changes are needed for serious consideration of a spot Solana ETF. Under the leadership of SEC Chair Gary Gensler, the SEC has classified SOL as a security in lawsuits against Binance and Coinbase, complicating its approval process compared to Bitcoin and Ether ETFs.
VanEck’s application for a spot Solana ETF follows cryptocurrency asset manager 3iQ’s filing for a similar product in Canada, marking a significant step in North America. The Solana ecosystem has also garnered positive attention from Franklin Templeton, a $1.5 trillion asset manager, although they have not confirmed plans for a spot Solana ETF.
Currently, over $1 billion worth of Solana exchange-traded products are available globally, indicating a strong demand for exposure to SOL.
Political Influences on Crypto ETF Approvals
James Seyffart, another Bloomberg ETF analyst, speculated that the approval of spot Ethereum ETFs was influenced by political factors rather than purely financial considerations. In an interview, Seyffart suggested that the political climate, including actions by the Biden administration and reactions from the crypto community, played a crucial role.
He also expressed skepticism about the approval of other crypto ETFs, including Solana, without significant regulatory changes to ensure the assets can be monitored for fraud and manipulation.
As the regulatory landscape evolves, the crypto community eagerly awaits further developments that could unlock substantial value for digital assets like Solana.
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