Institutional clients, US election? Who is behind the Solana spot ETF?

Jessy, Jinse Finance

On June 28, Beijing time, VanEck launched the VanEck Solana Trust and submitted the Solana spot ETF application to the SEC.

Interestingly, SOL, which applied for a spot ETF this time, had not had its futures ETF approved and traded online before. Is the release of the Solana spot ETF submission news just a hype?

No futures ETF has been launched, and it is considered a security

VanEck, which submitted the Solana spot ETF to the US SEC this time, is one of the issuers of the BTC and ETH spot ETFs approved in the United States. Summarizing the speech of VanEck's head of digital asset research at X, it can be concluded that the reason why VanEck applied for Solana spot ETF is roughly because it is very optimistic about Solana's technology and sees its prospects for widespread use as a digital commodity and a large number of customers holding it.

According to the application documents, VanEck Solana Trust is expected to be listed and traded on Cboe BZX Exchange Co., Ltd., and the specific details need to wait for the issuance notice.

An interesting thing is that VanEck did not play by the rules this time. It did not apply for SOL futures and directly applied for spot ETF, which may affect the approval process of the SEC. From this point, we can also see that there is still a lot of uncertainty about the approval of Solana spot ETF. Another uncertainty is that the SEC has clearly stated in the lawsuit that SOL is an unregistered security.

Other factors that will affect the SEC's judgment on Solana spot are its insufficient degree of decentralization. Solana's degree of decentralization is not as good as Bitcoin and Ethereum, especially since FTX previously held a large amount of Solana. And its market value is still far behind Bitcoin and Ethereum, which also indicates that its liquidity is poor.

In this way, is VanEck's mention of Solana's spot ETF to the SEC just a hype? In fact, it is not.

Institutional users strongly support, the US election may reverse the situation

First of all, Solana, as the dark horse of this bull market, has attracted much attention and is strongly supported by Wall Street capital. And some analysts pointed out that Solana's high throughput, low transaction fees and security make it a potential target for ETFs.

Why Solana instead of other coins? Previously, LTC, BCH and DOGE were all seen as strong candidates for the next wave of spot ETFs. The reason is simple. Generally, before the approval of virtual currency spot ETFs, they must go through such a process: the US CFTC regulator will first list the currency futures, then the futures ETF, and finally the spot ETF.

After the CFTC submitted the materials and passed them, the futures that were compliantly launched are BTC, ETH, LTC, BCH and DOGE. However, the actual trading of these three coins is not on CME, but on the derivatives exchange under Coinbase. The above three tokens have not been recognized as securities by the US SEC, so the industry believes that it may be the turn of the spot ETFs of these three coins to be approved next.

However, we seem to have only noticed the compliance of the process, but have not realized the important role of capital in spot ETFs.

Robbie Mitchnick, head of BlackRock Digital Assets, has clearly stated that the needs of institutional clients determine BlackRock's promotion of cryptocurrency products. In other words, if institutional clients favor a certain token, these fund companies will vigorously promote the spot ETF of this token.

We analyzed the cryptocurrency-related ETNs (index-linked securities) issued by Vaneck and found that Solana ETN is the ETN with the largest user demand (asset management scale) besides Bitcoin and Ethereum. Then it is easy to understand why other fund companies, including Vaneck, will vigorously promote Solana's spot ETF instead of those tokens that seem to be more correct in terms of process.

Although the launch of the Solana spot ETF currently faces great uncertainty, if there is a change in the leadership of the US government, especially under the leadership of the SEC, which supports cryptocurrency, the Solana spot ETF has a chance to be approved. The US election is having a real impact on the crypto market.

After the Solana spot ETF is approved, how will the price of SOL change? GSR released a report evaluating that if the capital inflow of Solana spot ETF accounts for 2%, 5% and 14% of Bitcoin inflow in the bear market, benchmark and ideal situation respectively, and Solana's market value accounts for an average of 4% of Bitcoin's market value in the past year, SOL may increase by 1.4 times in the bear market, 3.4 times in the benchmark situation, and 8.9 times in the ideal situation.

Next year, perhaps when the SEC changes its leadership, the Solana spot ETF will be launched? But everything is unknown.