Following VanEck’s application for a Solana ETF with the U.S. SEC, GSR Markets released a report stating that Solana is poised to become the next target for a digital asset spot ETF. It predicts that in a bullish market scenario, SOL’s price could potentially increase nearly 9 times.
The asset management giant VanEck recently filed for a Solana ETF with the U.S. SEC. On the same day, cryptocurrency market maker GSR Markets published a report highlighting the high potential of Solana becoming the next digital asset spot ETF. According to the institution:
Analysis of Possibilities for the Solana ETF
GSR Markets believe that the two key factors determining the next digital asset spot ETF are “decentralization level” and “potential demand.” Therefore, they analyzed digital assets based on these two factors. In assessing decentralization level, the institution presented three indicators as follows:
Satoshi coefficient: Measures the minimum number of independent entities that could collude to attack the network, with a larger number indicating higher decentralization.
Staking requirements: A measure of the ease or difficulty for anyone to participate in the network as a node operator or validator, including minimum staking and hardware requirements. Lower staking and hardware requirements signify higher decentralization.
CCData governance rating: Incorporates various governance measures related to participation, transparency, and decentralization.
Based on GSR Markets’ scoring (including some degree of subjectivity), the top four blockchains with the highest decentralization scores were Ethereum, Solana, Avalanche, and Aptos.
Decentralization Level Scores
Additionally, when evaluating potential future fund inflows for the spot ETF, issuers may consider potential demand. GSR Markets analyzed this based on three aspects:
Market indicators: Higher market capitalization, trading volume, and strong token performance may indicate strong future demand.
Existing product AUM: The higher the global AUM of existing investment products for tokens, the higher the potential demand for the spot ETF product.
Activity indicators: A strong, active community and extensive usage may also indicate future demand.
According to GSR Markets’ scoring, three blockchains—Ethereum, Solana, and NEAR—had demand scores higher than average.
Potential Demand Scores
Finally, by combining these two scores, the report derived the final ETF likelihood score. GSR Markets stated in the report:
ETF Target Asset Likelihood Scores
Potential Impact of a Solana Spot ETF on SOL Price
GSR Markets then evaluated the potential impact of a Solana spot ETF on the SOL price, referencing how a Bitcoin spot ETF affected Bitcoin’s price. They noted that Bitcoin’s price surged from around $27,000 in October to about $63,000 currently, a 2.3x increase, using this as a benchmark.
Considering three scenarios, GSR Markets estimated the proportion of fund inflows into a Solana spot ETF relative to Bitcoin:
Bear market scenario: Solana’s global investment product assets under management (AUM) are only 2% of Bitcoin’s.
Base case scenario: Based on actual fund inflows from 2021 to 2023, Solana’s cumulative fund inflows relative to Bitcoin over these three years are 5%.
Optimistic scenario (Blue Sky): Over the past two years, Solana’s relative fund inflows significantly increased, accounting for 31% and 9% of Bitcoin’s inflows in 2022 and 2023, respectively. GSR Markets considered an average of 14% relative fund inflows over these three years as the optimistic scenario.
Taking into account Solana’s market value relative to Bitcoin, GSR Markets concluded after a comprehensive assessment that:
In a bear market scenario, SOL could grow by 1.4x.
In the base case scenario, growth of 3.4x is expected.
In the optimistic scenario, SOL could grow by 8.9x. With SOL’s current price at $145, this implies GSR Markets foresees SOL rising to $1290.
Moreover, GSR Markets suggested that the potential impact on SOL could exceed these estimates. Unlike BTC, SOL is actively involved in staking and decentralized applications. Considering the current lower expectations for the Solana spot ETF in SOL’s price, this indicates a potentially greater room for SOL’s upward movement.
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