Because it may not make money. Last week, Cathie Wood’s Ark Fund decided to withdraw its ETH ETF application.
Ark BTC ETF ranks 4th (6% market share, the top 3 are BlackRock, Grayscale and Fidelity), but according to market speculation, it is "not very profitable". The main reason is that the fee rate of BTC ETF is relatively low compared with traditional ETFs, many of which are in the range of 0.19-0.25%, and ETFs are also engaged in "fee rate 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 a 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. So even Ark can only reluctantly give up ETH ETF. From a purely business perspective, mainstream coins with lower market capitalization, such as $SOL, have a market capitalization of 5% of $BTC. In order to recover the annual cost of 7 million US dollars, an ETF must manage at least 20 million SOL. BlackRock, the current leader in crypto ETFs, only manages 1.5% of the BTC in the entire network, while 20 million SOL means 4.5% of the paper circulation of $SOL.
In addition, consider the following: (1) SOL is naturally more difficult to raise than BTC, which has no interest. SOL's on-chain return can reach 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, GBTC peaked at 600,000 coins, while SOL peaked at only 450,000 coins, which is significantly lower than BTC.
The paper circulation of SOL is 460 million, but the actual circulation may be much lower than this. Everyone knows this. The lower circulation market value requires a larger position to be achieved while bearing high interest rates and regulatory pressure. Therefore, if SOL's current market value and circulation are considered, it will be difficult for these institutions to make money. In business, who has the motivation to promote a business that does not make money?
