Key Insights:
- Bitwise and Grayscale launched Solana ETFs on Wall Street this week, attracting over $130 million in the first three days.
- Zach Pandl believes that Solana ETFs have an edge over Bitcoin and Ethereum ETFs due to their staking capabilities.
- Despite strong ETF demand, SOL price was down over 2.5% to $187.01 (intraday), and experts cited the lack of buying interest from treasury firms.
Solana exchange-traded fund (ETF) launches on Wall Street saw strong trading activity, with asset manager Bitwise seeing $69.5 million in inflows on the first day. Grayscale also debuted its Solana staking ETF (GSOL) on the NYSE exchange. Company executives believe that these spot exchange-traded products or ETPs for SOL could attract $5 billion in inflows.
Solana ETFs to Attract $5 Billion, Says Grayscale Executive
Grayscale’s Head of Research, Zach Pandl, said that a U.S. spot Solana ETF could replicate the strong demand seen for Bitcoin and Ethereum ETFs. He believes that these products will particularly appeal to traditional investors seeking regulated exposure to digital assets.
Pandl projected that such a product could attract at least 5% of Solana’s total token supply within one to two years of launch. This is equivalent to over $5 billion worth of SOL at current market prices. In his interview with DL News, Pandl said:
Both Bitwise and Grayscale launched their Solana ETPs this week. Bitwise’s BSOL made its debut on Tuesday, attracting $129 million in inflows within the first two days, according to Bloomberg ETF analyst Eric Balchunas.
Similar to Bitcoin and Ethereum ETPs, Grayscale’s GSOL originated as a trust structure. This is typically a closed investment vehicle that trades at either a premium or a discount to the spot SOL price.
By comparison, Bitcoin and Ethereum ETPs have experienced substantial growth since their launch last year. The holdings across all issuers for Bitcoin and Ethereum ETFs are $149 billion and $26 billion, respectively, across 20 different funds.
Solana ETFs Can Attract Inflows Through Staking Facility
Solana ETFs hold a key advantage over their Bitcoin counterparts. They support staking, allowing investors to lock up tokens to help secure the Solana blockchain and earn yield. As of Thursday, staking rewards offered an annualized return of around 5.7%, according to data from Solana Compass.
On the other hand, Bitcoin’s proof-of-work mechanism relies on mining rather than staking to maintain network security. Grayscale’s GSOL ETF will distribute 77% of staking rewards to investors. However, that percentage may be adjusted over time, said Zach Pandl, the firm’s Head of Research.
However, some Ethereum ETFs, such as Grayscale’s ETHE, also include staking features. Still, Pandl noted that Solana ETFs “have a role in a balanced crypto portfolio.”
Matt Hougan, the chief investment officer at Bitwise, also shared his reasons for being bullish on Solana for the long term. According to the executive, investing in Solana represents a dual bet. This includes betting on the expansion of stablecoin and tokenization infrastructure, as well as Solana’s growing dominance within that market.
SOL Price Action Disappoints
Despite the optimism surrounding the Solana ETF, SOL’s price action has been disappointing, as bulls have failed to breach $200. As of press time, SOL price was trading 2.7% down at $187.01.
Crypto analyst Ali Martinez stated that Solana (SOL) must maintain support at the $190 level to sustain its bullish outlook. According to Martinez, holding above this threshold could pave the way for a potential rebound toward $240, with an extended target of $300.
Crypto analyst Ted Pillows noted that Solana’s treasury firms are currently underperforming compared to their Ethereum counterparts. He noted that this is clearly reflected in the SOL price chart.
Pillows pointed out the absence of strong buying activity, with Solana losing its key $200 support zone. He added that a sustained recovery was unlikely until treasury firms resume aggressive accumulation.
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