After the US SEC's major change in attitude towards ETH spot ETF, the market generally believes that ETH spot ETF may be a sure thing. So after ETH, what will be the next cryptocurrency ETF? Many people are focusing on Solana.
So is it possible for Solana to become the next ETF?
Solana is a high-performance public chain project. It was popular in the last bull market in 2021 and received support from SBF in the early days. However, due to the arrival of the bear market and the collapse of FTX, Solana was sluggish for a long time. However, with the market recovery, Solana has gradually begun to pick itself up. Coupled with the popularity of MEME and hot spots such as DePIN at the end of last year and the first quarter of this year, as well as some money-making effects of airdrops, the price of $SOL has also begun to gradually rise. The price has risen significantly from the lowest point to now, and has once again become a project favored by investors.
However, Solana also has problems. For example, the SEC has previously publicly stated that $SOL is a security, which is undoubtedly a judgment on SOL's ETF. This is also the main reason why some investors are not optimistic about SOL ETF.
Of course, in addition to the SEC’s opinion, $SOL actually has the following problems, which are also likely to affect the launch of its spot ETF.
1. Technical reasons
Simply put, it is the overall stability of a blockchain project. From its birth to now, the BTC ETF we have seen has had very few technical problems. Even if there are some loopholes, the risks can be controlled within a very low range. Therefore, we believe that BTC is stable and safe, which is also the main reason for the approval of BTC ETF.
But looking back at SOL, at the end of the last bull market and during the bear market, the Solana chain had experienced multiple downtime incidents. Obviously, this is also direct evidence of its immature technology. We all know the impossible triangle in the blockchain world. One of the factors is almost negotiable in terms of ETFs, and that is the security of the system. Ethereum has improved the efficiency of the system, that is, TPS, and the block speed has become faster, so its system is relatively complex. Therefore, security needs to be verified for a long time to ensure that there are no major problems. Because Ethereum had the DAO incident before, this is also the reason why some people are not optimistic about the Ethereum ETF.
On the contrary, Solana has faster transaction speeds and lower costs than Ethereum, but it also sacrifices security to a certain extent. Node crashes have been a serious security incident in recent years, and more than once, so the possibility of passing the ETF will be greatly reduced.
2. Market recognition
It took more than a decade for Bitcoin to be recognized by the market. Similarly, it has been nearly ten years since Ethereum was born. Looking back, there are few currencies that have survived in the market for so long and still have a high market value. LTC and DOGE are slowly going downhill, and XRP is even suing the SEC. Ethereum's real rise was in 2016-2017, and it has been more than seven years now. At the same time, the DeFi Summer in 2020 has determined Ethereum's market position, and its position as the second place for a thousand years is basically unshakable. Therefore, people pay more attention to the approval of Ethereum ETF.
But looking back at Solana, it has a relatively short history and has only experienced a 21-year crypto bull market. It is still unknown whether this bull market will fail or whether the next bull market will exist. After all, in the crypto circle, too many mainstream coins have disappeared in the long river of history. A temporary popularity does not mean that they will be popular in the future, such as currencies like EOS. Therefore, Solana still needs time to settle and be tested. It is basically irresponsible to launch an ETF too early.
3. Decentralization
This is also a factor in the impossible triangle. Of course, the degree of decentralization I am talking about does not only refer to the degree of decentralization of nodes and blocks, but also includes the control authority of the network, the degree of dispersion of coin holders, developers who contribute to the project code, factors affecting the price of the coin, or the degree of manipulation. In this regard, Solana actually still needs a lot of improvement. The SEC cannot allow any coin to be listed on the ETF just because it has a high increase in price. The degree of decentralization also represents the influence of the currency in the market to a certain extent.
On the contrary, if a currency's price fluctuates greatly and is greatly affected by factors such as a certain group, this will be detrimental to the approval of its spot ETF. SOL will need several years to perfect this.
4. Futures ETFs or other compliant fund products in other markets
Futures ETFs and compliant fund products in other markets are also important factors in the approval of ETFs. For example, BAKKT launched BTC, CBOE launched BTC futures ETF, and Hong Kong launched ETH spot ETF, which have all affected the views of traditional institutional investors on cryptocurrencies to a certain extent. For example, it is precisely because the United States has a BTC futures ETF that Hong Kong is able to launch a BTC spot ETF. The launch of ETH spot ETF in Hong Kong has increased market liquidity, which will also force the United States to launch an ETH ETF, otherwise they may lose the opportunity.
Therefore, owning a futures ETF is at least a touchstone to test whether market prices are manipulated, which SOL has not yet fully achieved. Therefore, judging from this bull market, the possibility of approving SOL spot ETF is not great.
Summarize
After the Ethereum ETF, from the current situation, there is no suitable next ETF currency for the time being. For most currencies, the market still needs to be tested and regulated to prevent "manipulation" and other facilities. For example, token ecosystem construction, decentralization, futures ETFs, and investment value for traditional institutions, etc. These all require time to test, rather than choosing whoever has the highest short-term growth rate, because short-term prosperity is only temporary and can only last after experiencing the ups and downs of the market.
