Here’s why Solana (SOL) ETF approval will depend on Ethereum

Here’s why Solana (SOL) ETF approval will depend on Ethereum
фото показано с : invezz.com

2024-3-8 03:02

Solana (SOL) price has surged this year, helped by the strong demand for its ecosystem. Some of the top players in the ecosystem like Bonk, Orca, Jupiter, and Marinade Finance have become leaders in the broader industry. 

Solana ecosystem is booming

Solana has made a comeback in key industries like DeFi, Decentralised Public Infrastructure (DePIN), and NFTs. It has become the third-biggest player in the DeFi industry as its total value locked (TVL) jumped to over $7.8 billion.

Solana is also the third-biggest player in the NFT space. Data shows that it handled over $13 million in NFT sales in the past 24 hours, making it the third-biggest player after Ethereum and Bitcoin. Its DePIN platforms like Helium and Render Network are growing their share.

Many developers are opting for Solana because of its strong features compared to Ethereum. The network can handle far more transactions in a second than Ethereum. It also has lower transaction costs, saving users substantial sums.

A good evidence of this is in the amount of money that Solana makes. Because of high fees, Ethereum made over $2.8 billion in the past 365 days. In contrast, Solana made just $53 million even as its transactions jumped.

Blockchain networks fees

Solana ETF approval hopes

Another reason why the Solana price has surged is that investors believe that it will soon have a spot ETF. If this happens, analysts believe that it will have substantial inflows as we have seen with Bitcoin. The iShares Bitcoin ETF (IBIT) now has over $11 billion in assets.

One piece of evidence for this hype is the performance of the Grayscale Solana Trust (GSOL), which is trading at a premium vs its net asset value (NAV). This premium has jumped to 11%, which is encouraging.

However, a Solana ETF approval is a long-shot situation. For one, no company has made their application with the Securities and Exchange Commission (SEC).

Instead, eight companies like Franklin Templeton, Blackrock, VanEck, and Fidelity have filed for their spot Ethereum ETF. The SEC is expected to decide on this approval in the coming months. 

If the SEC agrees to an Ethereum ETF, it will increase the possibility of it approving a Solana fund. That’s because the the two blockchains are similar and do the same role in the industry.

The biggest challenge for this approval process is that the two are significantly different than Bitcoin. The SEC believes that Bitcoin is a digital commodity since it uses a Proof of Work (PoW) technology.

Solana and Ethereum, on the other hand, uses proof-of-stake (PoS), which the SEC sees as problematic. The SEC is concerned that the two are financial securities because they are unregulated securities.

It argues that their staking features place holders at risk since there is no disclosure on how the yield or returns are calculated. 

Therefore, if the SEC approves a spot Ethereum ETF, it will open a door for companies to file for a SOL ETF. Besides, Solana has become a juggernaut with over $65 billion in market cap.

The post Here’s why Solana (SOL) ETF approval will depend on Ethereum appeared first on Invezz

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