- The Solana (SOL) price is expected to rise to $1300 once the SEC approves a spot Solana Exchange-Traded Fund (ETF).
- According to a GSR report, only Bitcoin (BTC) and Ethereum (ETH) currently satisfy the basic requirements for a spot ETF consideration; however, a pro-crypto president could change the possibilities.
Solana (SOL) recently became a topic of discussion after VanEck’s head of digital asset research, Matthew Sigel, announced that the asset manager has officially filed for the first-ever spot Solana ETF with the US Securities and Exchange Commission (SEC).
Soon after, Crypto News Flash also reported that digital asset manager 3iQ filed for the same ETF product on Canada’s Toronto Stock Exchange (TSE), sparking interest and setting the price up for a potential rally. With approval odds up for debate, a renowned market maker, GSR, has released a comprehensive report entitled “Is Solana Next?” to analyze all the possibilities of approval and the subsequent impact on the SOL price.
In the report, the evolution of the Solana network was lauded, with the nearly 300 billion transactions and over $4 billion in Total Value Locked (TVL) attributed to the super cheap transaction cost, its large number of decentralized applications, and the growing user base and developer communities.
Key Features that Qualify an Asset for ETF
In subjecting the potential approval of the spot Solana ETF under critical scrutiny, the GSR report explained that authorities expect underlying assets to have a federally-regulated futures market, which has existed for several years, and a futures-based ETF. With this, only Bitcoin (BTC) and Ethereum (ETH) are reported to tick the boxes. This implies that there could be no other ETFs anytime soon. However, things could change once a crypto-friendly president is elected into office.
The report also mentions that the level of decentralization and potential demand are the two key determinants for the next spot ETF. For the demand analysis, issuers are reported to consider various indicators, including market indicators, Existing Product Asset Under Management (AUM), and Activity Metrics. Upon their analysis, GSR observed that Ethereum, Solana, and NEAR are the only crypto projects with above-average scores.
For the decentralization scores, Ethereum, Solana, Avalanche (AVAX), and APT were said to have higher marks. Unfortunately, the SEC has already flagged most of the assets in the lists, including ADA, SOL, NEAR, ATOM, and XRP, as securities.
How Potential Spot Solana ETF Would Impact the SOL Price
Our review of the GSR report observes three key scenarios that could play out once the SEC approves the spot Solana ETF.
Firstly, there could be a bear case. According to the report, the Solana global investment product AUM is 2% of that of Bitcoin. This implies that the potential ETF inflow could be relatively minimal.
The second scenario is the bullish case. With this, GSR used the 2021 through 2023 inflows of Solana. In the last three years, Solana investment products gained 5% of the cumulative inflows relative to Bitcoin inflows. The researchers view this as 5% of their baseline scenario. The last scenario is what is labeled as the Blue Sky. Here, Solana’s relative inflow was said to be 31% and 9% of Bitcoin inflows in 2022 and 2023, respectively. According to the researchers, Solana may not keep pace with the exceptional inflows of Bitcoin from 2021 to 2024. However, its 14% average annual relative inflow is considered a potential blue-sky scenario.
Under the bearish flow scenario, GSR expects the price of SOL to surge by 1.4x. Under the baseline scenario, the price of SOL is expected to surge by 3.4x. Finally, the price has been tipped to surge by 8.9x under the blue sky scenario. This implies that the SOL price could go as high as $1,305 following the approval of a related spot ETF.
At press time, SOL was trading at $144, having declined by 2.9% in the last 24 hours.
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