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Solana has established itself as part of crypto’s ‘Big Three.’ With the others either having or nearing the launch of a spot ETF, it’s likely only a matter of time before Solana gets one, too. The impact on SOL could potentially be the most significant yet.
Interesting, right?
Let’s find out whether the crypto community will have another crypto ETF or if the US SEC will put its thumbs down.
By the way, if the Solana ETF is approved, it might send SOL’s price to an all-time high and forever change the game for Solana in the crypto space. So, before we learn about SOL ETFs, here’s why Solana matters.
Why is Solana a Big Thing?
Solana is a blockchain platform known for its speed, scalability, and user-friendliness. Here are some key points about Solana:
- High speed and low fees: Solana can process many more transactions per second than other blockchains like Ethereum, and it does so with significantly lower fees. This makes it suitable for a wide range of applications.
- Proof-of-History consensus mechanism: Solana combines Proof-of-Stake (PoS) and Proof-of-History (PoH) to achieve impressive speed and efficiency. PoH helps verify the order of transactions without requiring extensive computational power like traditional Proof-of-Work (PoW) methods.
- Smart contracts: Similar to Ethereum, Solana supports Decentralized Applications (dApps) through smart contracts. This opens up numerous possibilities for the platform in industries like finance, gaming, and supply chain management.
Solana ETF: Background
On June 27 and 28, investment firms VanEck and 21Shares filed for a Spot Solana ETF with the U.S. Securities and Exchange Commission, boosting SOL’s price by about 11% to $150. The hope is high for SEC approval within the next 12 months, despite the SEC categorizing SOL as a security in lawsuits against Binance and Coinbase.
Bloomberg ETF analyst Eric Balchunas suggests that potential changes in SEC leadership after the U.S. presidential elections could favor Solana, with pro-crypto Donald Trump showing better odds of winning, according to PredictIt. Balchunas views this filing as a strategic move anticipating the elections.
Analyst Dentoshi predicts SOL’s price could reach $170 in July. The Solana ecosystem shows increased risk sentiment, with top memecoins like dogwifhat (WIF) and Bonk (BONK) rallying. This growing demand for Solana-based products often translates to heightened demand for SOL, the underlying token.
The market has been optimistic about this news, and crypto analysts have been making predictions about SOL’s price.
In the following section, let’s see the market’s reaction and impact on SOL’s price.
Market’s Mixed Reaction Impact on Solana’s Price
The recent news of Solana’s first spot ETF filings by VanEck and 21Shares did not bring out the anticipated market enthusiasm. Despite an initial 6% surge in SOL’s price, the overall impact remained muted. According to insights from blockchain analytics firm Kaiko, open interest in derivatives markets lags 20% behind early June levels.
Although SOL saw positive activity with a Cumulative Volume Delta (CVD) of $29 million, primarily driven by significant purchases on Coinbase, this momentum was short-lived. The volume-weighted funding rate of SOL briefly spiked on June 27 before stabilizing, indicating a lack of sustained bullish demand. Overall, the initial excitement failed to revive the market sustainably.
The Causes of Market Indifference
Several factors contribute to this mixed lukewarm response. Solana’s derivative market remains relatively small, limiting broader investor interest. Additionally, regulatory uncertainties weigh heavily, particularly given SOL’s involvement in ongoing SEC litigation.
Meanwhile, traditional investors are increasingly drawn to blended ETFs like those recently proposed by Hashdex and HashKey, offering diversified exposure to Bitcoin (BTC) and Ethereum (ETH). Kaiko’s Value at Risk (VaR) analysis underscores the attractiveness of an equally weighted BTC/ETH portfolio, which showed significant returns in 2024 compared to previous years.
Expectations surrounding Solana’s ETF filings have fallen short due to regulatory challenges and the nascent state of its derivatives market. Concurrently, the allure of BTC/ETH mixed ETFs underscores investor preference for diversified exposure amidst market uncertainties. Continued market analysis will be crucial for informed decision-making and strategy adjustment as investors navigate these dynamics.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
