Markets
Solana ETF could drive SOL price to $1,300, threatening Ether’s market position ⋆ ZyCrypto
Solana (SOL) is primed for a price boom following reports of an incoming exchange-traded fund (ETF) tracking its native asset, but approval for spot ETFs could send prices soaring.
According to a report by cryptocurrency market maker GSR Markets, Solana is next in line to receive its series of ETF products after the successes of Bitcoin (BTC) and Ethereum (ETH). According to the GSR report, Solana has several positive points to receive the blessings of the US Securities and Exchange Commission (SEC).
Right off the bat, the report highlights Solana’s growing utility and market capitalization that have firmly cemented it as part of the top seven cryptocurrencies. The network’s decentralization and staking capabilities form the crux of GSR’s report on Solana’s chances of receiving ETF product approvals from the securities regulator.
The report notes that a futures-based ETF may be within reach in the near future, but the chances of a spot ETF tracking SOL are slim. While a Solana futures ETF is expected to boost asset prices by a few notches, GSR opines that a spot ETF will have profound impacts on SOL’s price by up to nine times.
The market maker achieved his hypothesis by tracking the impact of spot Bitcoin ETFs on the valuation of the largest cryptocurrency, playing it safe by revealing three scenarios. In a bearish scenario, the report predicts 2% inflows into Solana spot ETFs using the value of its global investment product AUM compared to BTC.
A base case scenario tracked the inflow of funds into Solana investment products between 2021 and 2023, noting that the products attracted 5% of inflows relative to BTC.
GSR’s blue sky outlook is more optimistic and uses an average annual relative inflow of 14% to predict the potential impact of spot ETFs on Solano. To reach a conclusion, the report adjusted relative flow estimates for each scenario to match Bitcoin’s 2.3x increase since the launch of BTC spot ETFs.
According to the report, the worst-case scenario under the bear case will see Solana rise 1.4x in the weeks following the approval of spot ETFs. A baseline model is expected to increase the asset’s price by 3.4x, while the blue sky model predicts an 8.9x rally. However, the researchers say the estimates are conservative at best.
“Furthermore, there are reasons to believe that the impact may be larger than these estimates, since, unlike BTC, SOL is actively used for staking and within decentralized applications and since the relationship between relative flows and relative size may not be linear,” the report says.
Since then, VanEck filed with the SEC for a Solana-based ETF, sending the price of SOL into a nearly double-digit rally. However, skeptics warn that the securities regulator may delay issuing a response.