Van Eck and 21Shares File for Solana ETFs: Here's What We Know
The ETF cryptocurrency space is heating up with another set of SEC applications, causing a frenzy online. After the successful launch of spot ETFs for Bitcoin and the approval of applications for Ethereum, another wave of applications is coming our way: for Solana spot ETFs. So, what can we expect from these applications, and will they replicate the attention and price action we've seen in Bitcoin?
21Shares has become the second issuer to apply to launch an exchange-traded fund tied to Solana's spot price. It becomes the second company to use, following a similar move from VanEck. The two companies' applications come at a time when cryptocurrencies are going mainstream, thanks primarily to the January 10th launching of spot ETFs for Bitcoin. SEC's approval of the spot ETFs for Bitcoin was a 'watershed' moment for the crypto industry, as it helped strengthen its argument as a separate asset class.
More than its regulatory acknowledgment, Bitcoin's approval also attracted the participation of traditional financial institutions, such as BlackRock and Fidelity. And with increased liquidity, Bitcoin's market price surged to a record high at $70k. These developments, it seems, have emboldened 21Shares and VanEck to try the same winning formula, hence submitting applications for Ether's spot ETFs. Interestingly, both firms also applied and got approved to offer spot Bitcoin ETFs last January. But if you think the approval for Solana ETFs will also be smooth, think again.
Mixed reactions after SOL spot ETFs announcement
Immediately after the applications were made public, Solana's market price increased by 6%. However, the enthusiasm on the spot for ETF filings for SOL was short-lived. Solana's price rally failed to hold, and it's currently trading at $129 as of July 5th, after hitting as high as 154 last July 3rd.
So, what could explain the somewhat warm response to the possible launch of SOL spot ETFs?
A few factors explain the public's mixed reactions to the plans for SOL's spot ETFs. Some observers say Solana's derivative market is still small enough to attract massive interest. Then, regulatory challenges seem to dampen the enthusiasm of many traders and investors.
In recent months, the SEC has been doubling down on crypto exchanges such as Binance and Coinbase for trading unregistered securities, which includes Solana. However, the Solana Foundation has already disputed the SEC's claims and classification of SOL as an unregistered security.
In a shared statement, the Solana Foundation strongly believes that SOL is not a security. The foundation added that SOL, a native token of the Solana blockchain, is an open-source, community-based, decentralized software project.
Finally, some traditional investors are looking at other more 'attractive' options, such as combined ETFs, like the ones filed by Hashdex and Hashkey, which offer a diversified portfolio of Ethereum and Bitcoin.
21Shares and VanEck plan to list SOL ETFs at the CBOE
If the SEC decides in 21Shares and VanEck's favor, they are expected to list the Solana ETFs at the CBOE or the Chicago Board Options Exchange. According to reports, CBOE must still request regulatory approval to change its rules to allow the trading of these new products.
Possible scenarios that can happen if the SOL spot ETFs are launched
Many industry analysts and traders are paying great attention to the SEC's decision. With no specific timeline, many speculate that the decision may come in the next few weeks. And for many, a favorable decision can lead to several exciting scenarios. Many are counting on a price surge for SOL, similar to the Bitcoin experience.
Immediately after the launch of spot BTC ETFs, market prices surged, and momentarily hitting the $70k level. Many are counting on the same scenario for SOL once the decision comes out. Also, market participants are looking at a massive price increase for the Solana-based meme coins.
What is a SOL spot ETF?
A Solana spot ETF is an exchange-traded fund that aims to track the price of SOL, offering investors and retail investors an exposure to the Solana blockchain without directly owning any SOL tokens. Buying a SOL ETF is similar to buying stocks.
Here, you're buying a share of the ownership of the fund. If you're a beginner trader in crypto or don't have the technical knowledge to buy and sell cryptos, investing in an ETF is a great option. The fund managers are directly in charge of purchasing and holding the tokens; as such, they normally charge management fees. Also, since these will be listed in an open market, you can buy a share of the ETF during market hours, unlike in crypto, where you can do it anytime.
Once approved, a Solana ETF will function as a regulated investment fund that tracks the market price of SOL by directly holding these tokens. The fund will be traded on a stock exchange (for example, the CBOE) so that individual investors and traders can buy or sell shares.
The value of the spot ETF shares tracks SOL prices, which means it can change depending on the underlying asset's market price. In short, buying some shares in the ETF gives you exposure to Solana's performance without directly buying or holding these tokens.
The SOL spot ETFs have a few components:
- Creation and redemption: The authorized participants, or APs, are responsible for creating and redeeming the SOL ETF shares. They can create new ETF shares by buying SOL tokens and delivering them to the ETF issuer in exchange for shares. They can also redeem these ETF shares by exchanging them with the issuer for SOL tokens.
- Market tracking: As mentioned, the fund's value tracks the SOL's market prices. In spot SOL ETFs, the fund managers will hold the actual tokens, ensuring that the ETFs price reflects the real-time value of the underlying asset.
- Liquidity: Investors and traders can enjoy liquidity when they buy and sell ETF shares. ETF shares can be easily bought and sold in the open market, and there's a continuous creation and redemption process.
- Offers diversification: Yes, the ETFs will only hold SOL tokens, but by buying shares, you can diversify your portfolio. You can now gain exposure to the Solana ecosystem and its highly volatile price without the hassles and risks associated with directly buying and holding it.
The bottom line
We can't deny that spot ETFs are changing the dynamics of the growing crypto industry. It started with SEthe 's approval of Bitcoin spot ETFs last January 2024 and then with the plans to introduce Ether ETFs as well. Fund managers and traders seem excited at the prospect of increasing prices, liquidity, and improved market participation. A favorable SEC decision will mark another major milestone for the crypto industry as more individual and institutional players join the market.
