Original author: 0xTodd, co-founder of Ebunker
I am pessimistic, mainly because:
1. ETF fees are too low
2. $SOL market cap is also low
3. There are few institutions/retail investors willing to hold SOL nakedly (the APR of Staked SOL is as high as 8%, while that of ETF is -0.2%).
The product of the three is probably not enough to cover the fees of these ETF issuers. If everything goes smoothly, you can go for it, but if you encounter great resistance later, you will most likely withdraw. After all, if you don't make money, there is no motivation to push forward. There is a metaphor that is not very vivid. Now it is similar to - after the college entrance examination, you are ready to repeat the year, but it does not prevent you from filling in Tsinghua University or Peking University as your first choice.
As for why he is pessimistic about the approval of Solana ETF, 0xTodd gave a more detailed explanation in early June. BlockBeats reproduced the full text as follows:
Why is it so hard to wait for the SOL ETF? Because it may not make money. Last week, Cathie Wood’s Ark Fund decided to withdraw its ETH ETF application.
Ark BTC ETF ranks fourth (market share is 6%, the top 3 are BlackRock, Grayscale and Fidelity), but according to market speculation, it is "not very profitable."
The main reason is that the fees of BTC ETF are lower than those of traditional ETFs, many of which are in the range of 0.19-0.25%. ETFs are also engaged in a "fee competition".
A simple estimate shows that with the current scale of Ark BTC ETF, it can earn about 7 million US dollars in management fees per year, so the corresponding costs are probably of the same order of magnitude. Therefore, if Ark BTC ETF is still hovering near the profit line, then for Ark, pushing ETH ETF may become a loss-making business. Therefore, even Ark can only reluctantly give up ETH ETF.
From a purely business perspective, mainstream coins with lower market capitalizations, such as $SOL, have a market capitalization of 5% of $BTC. In order to recover the annual cost of $7 million, an ETF must manage at least 20 million SOLs.
BlackRock, the current leader in crypto ETFs, only manages 1.5% of the entire BTC network, while 20 million SOL means 4.5% of the $SOL paper circulation.
In addition, consider:
(1) SOL is naturally more difficult to raise than BTC, which has no interest. SOL's on-chain yield is about 8%, but ETFs are prohibited from including staking functions. Holding SOL ETF means that it will naturally underperform SOL on the chain by 8%, while Bitcoin only underperforms by 0.2% management fee.
Taking Grayscale as an example, the peak of G BTC was 600,000, while the peak of SOL was only 450,000, which is much lower than BTC.
(2) The paper circulation of SOL is 460 million, but the actual circulation may be much lower than this. Everyone knows this.
The lower circulating market value requires a larger holding while bearing high interest rates and regulatory pressure. Therefore, if SOL's current market value and circulation are taken into account, it will be difficult for these institutions to make money.
From a business perspective, who would have the motivation to promote a business that doesn’t make money?
