- Solana (SOL) price is expected to rise to $1,300 once the SEC approves a spot Solana exchange-traded fund (ETF).
- According to a GSR report, currently only Bitcoin (BTC) and Ethereum (ETH) meet the basic requirements to be considered as a spot ETF. However, a pro-crypto president could change these possibilities.
Solana (SOL) recently became a topic of discussion after Matthew Sigel, head of digital asset research at VanEck, announced that the asset manager had officially filed the first spot Solana ETF with the U.S. 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 surge. With the chances of approval still up for debate, a renowned market maker, GSR, has published a comprehensive report titled “Is Solana Next?” to analyze all the possibilities of approval and the subsequent impact on the SOL price.
The report praised the development of the Solana network, saying that the nearly 300 billion transactions and total value locked (TVL) of over $4 billion were due to the super-cheap transaction costs, the large number of decentralized applications, and the growing user base and developer community.
Key characteristics that qualify an asset for an ETF
The GSR report took a hard look at the potential approval of the Solana spot ETF, explaining that authorities expect the underlying assets to be a government-regulated futures market that has been in existence for several years and a futures-based ETF. Only Bitcoin (BTC) and Ethereum (ETH) reportedly meet the criteria. This means there may not be any other ETFs in the near future. However, things could change once a crypto-friendly president is elected to office.
The report also mentions that the level of decentralization and potential demand are the two main determinants for the next spot ETF. For demand analysis, issuers reportedly consider various indicators, including market indicators, existing product assets under management (AUM), and activity metrics. In their analysis, GSR found that Ethereum, Solana, and NEAR are the only crypto projects with above-average scores.
Among decentralized assets, Ethereum, Solana, Avalanche (AVAX) and APT are said to have received better marks. Unfortunately, the SEC has already labeled most of the assets on the lists, including ADA, SOL, NEAR, ATOM and XRP, as securities.
How a potential spot Solana ETF would impact the SOL price
Our review of the GSR report reveals three key scenarios that could play out once the SEC approves the Spot Solana ETF.
First, there could be a bear market. According to the report, the global investment product Solana’s assets under management are 2% of Bitcoin’s assets, meaning the potential ETF inflow could be relatively small.
The second scenario is the bullish case. Here, GSR used Solana’s inflows from 2021 to 2023. Over the past three years, Solana investment products garnered 5% of cumulative inflows compared to Bitcoin’s inflows. The researchers consider this to be 5% of their base case. The last scenario is called Blue Sky. Here, Solana’s relative inflow is expected to be 31% and 9% of Bitcoin’s inflows in 2022 and 2023, respectively. According to the researchers, Solana may not be able to keep up with Bitcoin’s extraordinary inflows from 2021 to 2024. However, its average annual relative inflow of 14% is considered a potential Blue Sky scenario.
In the Bearish Flow scenario, GSR expects SOL price to increase by 1.4x. In the Base scenario, SOL price is expected to increase by 3.4x. In the Blue Sky scenario, SOL price is expected to increase by 8.9x. This means that the SOL price could rise to as high as $1,305 following the approval of a corresponding spot ETF.
At press time, SOL was trading at $144, after a decline of 2.9% in the last 24 hours.
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