Original author: Martin Young
Reprinted: Koala, Mars Finance
The chances of Solana, Cardano, and other crypto assets getting approved as spot exchange-traded funds (ETFs) in the U.S. are slim, and attracting investors may be more difficult.
Katalin Tischhauser, head of investment research at Sygnum Bank, joined several recent commentators in expressing skepticism in an interview about whether other altcoins can follow Ethereum and Bitcoin in becoming spot cryptocurrency ETFs in the United States.
Tischhauser said the main obstacle to the approval of other cryptocurrency ETFs in the U.S. is the lack of trading venues with market oversight that the SEC deems acceptable.
The SEC has a responsibility to ensure they prevent market abuse, fraud and market manipulation, so for products it approves, it monitors the underlying markets by looking at regulated market venues like the Chicago Mercantile Exchange (CME) to ensure trading practices are fair, transparent and free from manipulation, Tischhauser explained.
“The CME offering Bitcoin and Ethereum futures is a workaround.”
The SEC requires regulated market venues to assess market integrity, but currently considers cryptocurrency exchanges to be “unregulated securities exchanges.”
If these issues are resolved and the SEC accepts cryptocurrency exchanges like Coinbase as regulated markets, it could lead to the creation of more cryptocurrency ETFs.
More stringent requirements
Even if approved, Tischhauser believes there won’t be much demand for an altcoin ETF.
“We don’t think there will be much demand for ETFs other than Bitcoin and Ethereum. Ethereum has half the visibility of Bitcoin, and other tokens like Solana also have little visibility outside of the crypto market.”
Since launching in January, spot Bitcoin ETFs have generated a total of $17.7 billion in inflows, demonstrating clear demand for the asset class and that new ETFs are outperforming other major asset funds.
The spot Ethereum ETF got off to a slow start, with the first week of trading dominated by gross outflows. However, this was largely expected due to the large withdrawals from the Grayscale Ethereum Trust.
Tischhauser said the cryptocurrency market outside of the Bitcoin and Ethereum ETFs could see a very different picture.
Tischhauser noted that the high premium on Grayscale’s Solana Trust (GSOL) suggests there is some demand, but he also stressed that its much smaller assets under management compared to its Bitcoin and Ethereum trusts suggest that overall interest is limited.
BlackRock’s Samara Cohen speaks on alternative spot cryptocurrency ETFs on July 29. Source: Bloomberg
The GSOL fund currently has just $78.6 million in assets under management, or about 1.2% of its Ethereum Trust (ETHE), which still has $6.3 billion in AUM despite continued outflows.
Samara Cohen, BlackRock’s head of ETFs and index investing, and Robert Mitchnick, the asset manager’s head of digital assets, also expressed concerns in July about the lack of demand for altcoin ETFs.
Cohen noted that altcoin spot ETFs like Solana are unlikely to appear in the short term, while Mitchnick said: “I don’t think we’re going to see a long list of cryptocurrency ETFs.”
VanEck’s head of cryptocurrency research disagrees
Not everyone is pessimistic about other altcoin ETFs.
In a July 31 interview, Matthew Sigel, head of digital asset research at VanEck, said: “We disagree with the view that Bitcoin and Ethereum will become the only ETFs. The European market already has a variety of crypto ETPs, including single tokens and basket options.”
He added: “Our goal is to lead this innovation in the United States as well.” VanEck filed an application for the Solana ETF with the U.S. Securities and Exchange Commission (SEC) on June 27.
Cumulative flows of spot ETH ETFs. Source: Farside Investors
On August 1, total flows for spot Ethereum ETFs turned positive again, with Grayscale’s ETHE fund seeing the smallest outflow to date at $78 million, bringing total inflows for the day to $28.5 million.
