Will there be a new ETF in the US coming soon? And if so, who will it be? SOL, XRP, BNB, Chainlink? Well, today we have something different for you.
Two of our writers at Altcoin Buzz contributed to this article. One pro-ETF. The other anti-ETF. Let’s see what they think and you decide for yourself. Will the US get a new ETF soon after the Ethereum ETF?
1) Crypto Spot ETFs in the USA
So, is a $SOL spot ETF possible within the next year and a half? 1A It’s a logical question, seeing approval for $BTC and $ETH spot ETFs. Solana and very few other selected crypto assets can be next in line. The three most mentioned potential candidates are $XRP, $LINK, and $SOL. So, here’s my case why I see Solana next in line.
Source: X
Right off the bat, the political landscape is changing. 3 The upcoming election, in the US, turns out to be a catalyst. After initial Democrat resistance, they did a 180 on the $ETH spot ETF. At least, plenty of political pundits see it this way.
The Democrats felt that they were losing ground to the Republicans if the SEC didn’t approve this $ETH ETF. So, you can argue that now once they opened this door, they can’t close it again. Recently, former US president Donald Trump announced himself as the ‘crypto president’. So, can the Democrats stay behind?
According to a report, Almost 93 million adults in the US own crypto. That’s almost a third of the 333 million US population. These are a lot of votes. So, that puts the potential for more crypto spot ETFs in perspective.
2) Fundamentals of a Crypto Project
The next aspect to look at is the fundamentals and quality of a project. So, let’s take a closer look at Solana’s fundamentals. Well, they look as good as when the project started. Sure, in December 2022 the $SOL price dropped below $10. However, there were external factors, like the FTX crash, at work.
But, the fundamentals never changed. They remained in place and are solid. The current $SOL price is back to $160 and there’s plenty of potential to see more gains. Currently, Solana ($SOL) is fifth if ranked by market cap. Another reminder of having good fundamentals.
Source: X
Projects don’t reach that position with shaky fundamentals. 6 With a $1.3 billion volume in 24 hrs, it also shows that there’s money moving around in Solana. It makes them the fifth crypto asset for liquidity. That’s after $BTC, $ETH, $USDT, and $USDC.
So, a couple of more reasons that back up a potential $SOL spot ETF. But there are plenty of other reasons that favor Solana. So, let’s take a look
Solana in the Driver’s Seat
Solana has indeed a lot going for itself to justify a spot ETF. So, let’s take a look at some of these reasons:
- Fast and cheap transactions: Solana transactions are exactly that. In turn, this attracts investors.
- The Solana ecosystem keeps growing: One of Solana’s strong points was NFTs. However, it now flourishes in various sectors. For example, it rules the current meme coins frenzy. It’s also strong in other sectors. Like DeFi or DePIN. For instance, with Jupiter, Raydium, Pyth, Render Network, or Drip Haus with NFTs.
- A recent network upgrade: 15th April saw the most recent upgrade. This allows for even better scalability. 5 The sheer number of meme transactions had slowed the chain down. Now it can handle this again.
Source: X
Canada is paving the way for Solana spot ETFs. SOLWealth, a federal organization, plans to submit a $SOL spot ETF to the local authorities. There are already other Solana-based securities in the US. For example:
- Grayscale’s GSOL: The Grayscale Solana Trust, which holds $SOL. It’s a security, and you have exposure to $SOL. There’s no need to hold or store $SOL. However, you need to be an accredited investor, and it’s only available as an OTC. That’s an over-the-counter asset.
- VanEck’s Solana ETP or 21Shares Solana ETP: An ETP is an exchange-traded product. However, in contrast to a spot ETF, 9 there’s no need to hold $SOL as an underlying asset for the firm that offers an ETP. Currently, these ETPs only trade in specific European countries.
A very recent development sees the rumors for a $SOL spot ETF getting stronger. KuCoin posted about BlackRock gearing up to apply for one. So, there it is, plenty of reasons why a $SOL spot ETF is a possibility. What do you think? Will there be a SOL ETF soon? Let us know in the comments below.
The Bear Case for a SOL or LINK ETF
Now we are going to change gears and discuss why there won’t be a new crypto ETF for some time in the US.
First, as the Pro case states clearly, and I agree, the best chance for a new ETF is with Solana. Looking at CoinGecko’s front page, there are only 9 projects that trade over $1 billion daily. This is just about the minimum that institutions look for in liquidity to fund the purchases an ETF will require daily.
Bitcoin’s ETF volume is routinely over $2 billion a day. It’s rarely less than $1 billion a day. So of the 9, 3 are part of approved ETFs. They are Bitcoin, Ethereum, and Lido Staked ETH. Two are stablecoins with USDC and USDT. Then it’s
- BNB.
- Solana.
- XRP.
- Dogecoin.
Source: X
Doge is out as a memecoin. Banks don’t care about that, even if individual investors do. BNB is out due to its relationship with Binance, which the SEC has targeted in the past. Same with XRP, even though XRP won its most recent court case. That makes Solana the most likely choice.
Here’s Why That Won’t Happen
In a word, it’s about hedging. And risk management. Both Bitcoin and Ethereum, and only those, have futures contracts in the US. Both trade on the CME or Chicago Mercantile Exchange. This is vital. But who cares? Large institutions do. Right now, they are happy to collect their fees. But they don’t want to take too much risk yet.
So they are doing a delta-neutral trade. That means they make money regardless of Bitcoin’s price. For example, right now, on the day we wrote this, the Bitcoin price is $69,379. And the futures price is $69,960. So an institution can go long Spot through the Bitcoin ETF and short the futures on the CME and lock in a gain of $581. That doesn’t seem like a lot. But it’s almost a 1% for doing nothing.
This is a locked-in profit along with the management fees for taking those dollars and converting it to Bitcoin. Eventually, they will be happy to go long Bitcoin, and we know they don’t want to sell it because the contracts and withdrawals settle in USD. Institutions can ONLY do this because there is both a Spot ETF and a Futures ETF market. No other project has a futures ETF, so none will get a Spot ETF until they do.
Source: X
That could happen someday, but it won’t be anytime soon. The other big thing the futures ETFs did was provide a testing ground for the SEC, CFTC, and other government agencies to see if there is a demand for a spot ETF for that particular asset. And I do not see that changing. The order of events looks like:
- SOL or whoever will need a futures ETF.
- That ETF will have to do good volume for a minimum of 6–12 months.
- They apply for a Spot ETF.
- Depending on who the US President is and who is running the SEC, a decision could be fast or slow on this application.
And that’s how it will go. Without a futures ETF that’s running and successful, there is no basis to believe a spot ETF is coming down the line anytime soon.
The Decision: What Do YOU Think?
So what do you think? In the bull case, we outlined why SOL is the most likely candidate. And both sides agree on this. Also, the bull case has:
- ETPs in other countries and a Grayscale fund in the US.
- Solana is big and liquid.
- The US political landscape is becoming more favorable to ETFs.
- Crypto holders in the US are becoming an important voting bloc.
Then you have the bear case. So what do you think? Which argument is more persuasive to you?
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
