Spot Solana ETF Speculation Spikes

Spot Solana ETF Speculation Spikes

Speculation about Solana ETFs has climbed recently.

sumit
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Senior ETF Analyst
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Reviewed by: Kent Thune
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Edited by: James Rubin


 

Chatter about the next potential spot cryptocurrency ETF has spiked on the 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 whether Solana exchange-traded funds will be next. 

The fifth most valuable cryptocurrency by market cap after bitcoin and ether—and arguably the third most popular—SOL is the native cryptocurrency of the Solana blockchain. 

It currently has a $74 billion market cap versus $1.4 trillion for bitcoin and $442 billion for ether. But despite its smaller size, SOL has an enthusiastic base of investors who are convinced that Solana will play a major role in crypto’s future. 

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 efficiency.  

It’s a legitimate project and SOL has potential as an investment, but there is a much steeper hill to climb for SOL ETFs compared to spot bitcoin and ether ETFs. 

The biggest headwind is the lack of regulated futures contracts for SOL.  

Futures contracts tied to both bitcoin and ether are available on the CME, the largest futures exchange in the world. And those contracts were instrumental in getting the SEC to approve ETFs tied to those cryptocurrencies.  

No such futures contracts exist for SOL today, and the CME doesn’t have plans to list them any time soon, according to industry sources.  

GSOL Gauge on Potential for SOL ETF  

It’s conceivable that at some point SOL futures and SOL ETFs could be available for trading, but that day is still far off.  

One way to gauge the likelihood of SOL exchange-traded funds is by looking at how far the market price of the Grayscale Solana Trust (GSOL) is trading from its net asset value.  

Last year, analyzing the movements in the discount on the Grayscale Bitcoin Trust (GBTC) was a handy way to see investors’ collective view on the odds of a spot bitcoin ETF.  

When that discount started to narrow significantly, it indicated that the unveiling of a spot bitcoin ETF was increasingly likely. 

Likewise, when the discount on the Grayscale Ethereum Trust narrowed significantly, from 24% to less than 2%, this past May, it suggested that spot ether ETFs were imminent. 

GSOL is different than GBTC and ETHE in that it’s not trading at a discount to NAV. On the contrary, it currently trades with a massive 633% premium! 

The premium may reflect that there are relatively few shares outstanding for GSOL—only 1.25 million—versus 310 million for ETHE. 

While GSOL’s share count is increasing through private placements, it’s rising slowly. 

The enormous premium is a result of the low share count and high demand for GSOL. 

Still, if and when SOL ETFs become possible, that premium should collapse.  

Of course, there is the possibility that it could decline even without any new ETF developments, which makes it an imperfect gauge of the likelihood of a SOL ETF. 

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.