Prediction: Solana will be the first cryptocurrency to get a spot ETF in 2025

Following the spot Bitcoin and Ethereum ETF approvals, there has been much speculation as to what crypto could be next. Already, a few names have been suggested, including all the usual suspects: XRP, Solana (SOL 8.47%), Cardano, Litecoinand Avalanche.

Of these, Solana has the best chance of getting a spot ETF. In fact, this could happen as early as January 2025. From my perspective, there are two key factors that make this happen.

Market demand

In terms of market capitalization, Solana ranks fifth among all major cryptocurrencies. This is a huge determinant as market cap can be a useful indicator of investor demand. As a general rule, Wall Street won’t launch a product if there isn’t enough demand for it, so it’s worth looking at how much demand is coming from both retail and institutional investors.

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In late June, crypto investment firm GSR analyzed the numbers and concluded that Solana trailed only Bitcoin and Ethereum in terms of overall demand. The firm’s “demand analysis” considered three key factors: (1) market capitalization and total trading volume, (2) assets under management of investment products already in the market, and (3) size, activity and online reach. community for a particular symbol. In all of these metrics, Solana outperformed rivals XRP, Cardano and Avalanche.

There is also excellent data available from CoinShares, which tracks institutional investor flows into and out of major cryptocurrencies. According to the latest report from early August, Solana still has a clear lead over major rivals like XRP, Cardano and Litecoin in terms of year-to-date flows. That said, investor inflows into both Bitcoin and Ethereum are smaller than anything going on with Solana right now.

Regulatory perspective

Of course, there is no way a Solana ETF will be approved if regulators have doubts that Solana might actually be a security. That was the one factor that hung over Solana for much of last year. But in late July, the SEC appeared to back away from its previous position when it acknowledged that it would no longer view Solana as a potential security. If you’re hoping for a Solana ETF, that’s exactly what you want to see happen.

Moreover, it is important to keep an eye on what is happening in other financial markets, beyond the US borders. For example, in August, Brazilian regulators approved a spot Solana ETF. If this works well in Brazil, then it could be much easier to approve a US version of the ETF. And indeed, investment firm VanEck — one of two firms that have already filed a spot Solana ETF with the SEC — now says a Solana ETF is “inevitable.” I wouldn’t go that far, but it looks good for Solana right now.

What to look for in 2024

As we saw from the recent mini-crash of the market at the beginning of August, there is still quite a bit of volatility in the crypto market. Any sustained selling over the next few months would likely delay the release date of a Solana ETF simply due to a lack of investor demand for the product. Moreover, the SEC is unlikely to approve much if the crypto market shows signs of weakness or if demand for existing crypto ETFs wanes.

So keep an eye on the overall health of the crypto market as well as investor flows into Bitcoin and Ethereum ETFs. If the trend is positive, then I’m much more bullish on a Solana ETF launching in early 2025. And if pro-crypto sentiment holds after the 2024 presidential election, then I’d be even more bullish.

That being said, Solana is a high-risk, high-reward crypto investment. So if you’re thinking of investing in Solana, make sure you do your due diligence. Investing in a Solana ETF would help mitigate some of this risk, but it cannot eliminate the risk of owning Solana entirely.