Sophia’s Thoughts On The Solana ETF Filings
Solana Spot ETF applications were submitted last week. But what is Solana and how does it stack up against Bitcoin and Ethereum?
These are Sophia's Thoughts:
In late June, VanEck and 21Shares filed applications to launch Solana exchange-traded funds (ETFs), boosting Solana’s price by over 16%.
Solana, created in 2018 and launched in 2020, is a blockchain built for efficiency, performance, and wide application.
Solana is unique for its high speed, scalability, low transaction costs, and rapidly growing decentralized ecosystem, making it more efficient and economical than Bitcoin and Ethereum.
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🚀 Last week’s market performance
The market ticked upwards by 4.0% amidst a relatively quiet week, with Bitcoin (BTC) leading the charge with a 4.3% increase. The worst performing coin of the week was Artificial SuperIntelligence Alliance (FET), which lost 20.5% upon fear surrounding a merger between AGIX and OCEAN into FET. The best performing coin of the week was Ethereum Name Service (ENS), which gained 32.6%.
🧐 What is your crypto mood today?
In each Sophia's Thoughts newsletter, we ask about your crypto mood. Your response to this question helps Sophia get a better sense of the pulse of crypto markets. And this ultimately translates into better insights for you when combined with Sophia's AI models. Your data empowers Sophia to provide you with even better intelligence going forward!
🧠 What is Solana?
Solana, created by Anatoly Yakovenko and Raj Gokal in 2018 and launched in 2020, is a blockchain built for efficiency, performance, and widespread application.
What sets Solana apart from other tokens is its minimal transaction costs and a wide array of decentralized applications. This has drawn a vibrant and diverse community of users and developers to the platform. Consequently, Solana boasts nearly 300 billion transactions and over $4 billion in total value locked.
Solana continues to distinguish itself with numerous high-profile token launches, various projects migrating to its platform, and the introduction of innovative features like token extensions. Among its notable projects are Jupiter (JUP), a decentralized exchange, and Pyth (PYTH), an oracle coin. Additionally, Solana is experiencing activity in unique use cases such as order books, NFTs, DePINs (decentralized physical infrastructure), memecoins, and more. This combination of diverse applications and low costs positions Solana as a strong player in the blockchain space.
🤔 What Happened?
In the last week of June, the cryptocurrency market underwent a large development as two major asset managers, VanEck and 21Shares, filed applications to launch Solana exchange-traded funds (ETFs). Following the recent approvals of Bitcoin and Ethereum spot ETFs, the world's fifth-largest cryptocurrency by market value Solana is now the third token to be considered for a spot ETF.
Both VanEck and 21Shares plan to list their ETFs on major exchanges, with 21Shares aiming to trade on the CBOE BZX Exchange and using Coinbase as the custodian for its Solana holdings. These ETFs will not participate in staking but will focus on securely holding Solana tokens in segregated wallets on the Solana blockchain.
“We believe this is a necessary step for the crypto industry and it holds true to our mission to bring to market easily accessible financial products centered around crypto assets”
The immediate market response to these filings was notable. Solana's price surged from the low USD $130s to $148, reflecting a more than 16% increase over the past week. This rise indicates the anticipated boost in liquidity and institutional investment that an approved ETF could bring to Solana. Following Bitcoins Spot ETF approvals and listing, prices saw a dramatic increase and the overall market saw an influx of capital.
However, the timeline for Solanas approval is lengthy and poses concerns. As Bloomberg ETF analyst Eric Balchunas noted: "The knee jerk reaction here is 'oh this will never be approved bc there aren't Solana futures' agree but.. if change at POTUS I think anything poss. Just imagine Hester Peirce (or someone like that) running the SEC." Balchunas's statement highlights the current skepticism surrounding the approval of a Solana ETF. He suggests that this skepticism could be mitigated if there was more crypto-friendly administration in power. Nonetheless, the Solana Spot ETFs are not expected to go live until the first quarters of 2025 at the earliest, after the US presidential election.
🔶 Why Solana?
Solana stands out from other tokens on the blockchain due to its speed, scalability, and low transaction costs. Unlike Bitcoin and Ethereum, which process a limited number of transactions per second (TPS), Solana can handle over 50,000 TPS, making it much faster and efficient. Another key advantage of Solana is its extremely low transaction fees, with an average cost of just $0.00025 per transaction, compared to several dollars for Ethereum transactions. This makes Solana far more economical for users and developers.
Solana also has a rapidly growing ecosystem that supports a wide range of applications, from decentralized finance (DeFi) to non-fungible tokens (NFTs), enhancing its utility and value. Unlike Ethereum, which can be dominated by a small number of validators, Solana's network is highly decentralized, requiring control of at least 22 top validators to dominate, compared to just 3 for Ethereum. This high level of decentralization is set to improve further with upcoming innovations like FireDancer, which will boost the network’s resilience and security. Moreover, Solana’s Proof of History (PoH) mechanism timestamps transactions, allows for quicker validation and enables the network to handle a high volume of transactions efficiently.
In summary, Solana’s combination of speed, low costs, and growing ecosystem makes it a compelling choice for developers, investors, and users. These attributes distinguish it from Bitcoin and Ethereum and position it as a prime candidate for new financial products like ETFs.
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