• DeFi giant’s SOL token may be on deck with Ethereum ETF poised get green light.
  • Sceptics say a Solana futures ETF probably has to come first.
  • Approval of Ethereum ETFs is firing a pre-summer rally.

With investors anticipating approval of an Ethereum ETF in the US on Thursday, all eyes are turning to which cryptocurrency may be next.

For many, there’s a clear candidate — Solana.

“You got to think about Solana as probably the next one,” said CNBC presenter Brian Kelly on Wednesday. “Bitcoin, Ethereum Solana are probably the big three for this cycle.”

It’s not a bad call.

Joe McCann, CEO of crypto investment firm Asymmetric Finance and self-proclaimed Solana maxi, said SOL must be on deck given its stature in the market.

SOL is up more than 68% this year, according to CoinGecko. And with a market value topping $77 billion, Solana is the fifth biggest cryptocurrency.

Juiced DeFi market

The advent of an Ethereum ETF four months after spot price Bitcoin funds hit the market is juicing the DeFi market. Ether has jumped 29% in the last seven days, which is around six times better than Bitcoin.

Solana, meanwhile, has done even better thanks to its savvy embrace of memecoins earlier this year, and unorthodox ventures like the rollout of a new mobile phone called Chapter 2.

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‘A Solana ETF similar to the ETH vehicles should bring no reasonable objection.’

—  Michael Cahill, Doura Labs

But the big story is how Wall Street powerhouses such as BlackRock, which used to ridicule crypto, are now falling over themselves to package cryptocurrencies into cheap and easy-to-trade exchange-traded funds.

Along with BlackRock, Van Eck and Fidelity have applied to issue Ethereum ETFs. The US Securities and Exchange Commission is expected to green-light the products on Thursday.

As a proof-of-stake token just like Ether, Solana may benefit from regulators’ familiarity with the product design.

“Technically speaking, a Solana ETF that has similar unstaked characteristics to the ETH vehicles being reviewed should bring no reasonable objection,” Michael Cahill, CEO of Doura Labs, told DL News.

“Given the developer activity, I view a SOL ETF as having a greater than 75% of listing this year, and over 95% next year.”

Then again, the bulls may be getting a little carried away.

Polymarket, the prediction market closely followed by crypto investors, reports that a Solana spot ETF has a 7% chance of approval in 2024.

The betting pool is small, too, with just over $100,000. This signals the proposition isn’t attractive enough for speculators.

Solana futures?

Nate Geraci, co-founder of the ETF Institute and President of the ETF Store, is equally pessimistic. At least not until the market sees Solana futures contracts.

Long before the spot Bitcoin ETF was approved, future contracts for Bitcoin were approved to trade on the Chicago Mercantile Exchange, one of the largest derivatives exchanges in the world. Likewise for Ethereum.

Geraci also said that before a Solana ETF can be approved, Congress must approve a clear regulatory framework for digital assets in the US.

Sweeping legislation

Spot price ETFs, of course, are typically marketed to retail investors, although institutions make good use of them as well.

While regulators have long balked at exposing retail investors to crypto ETFs, a number of developments appear to be ploughing the ground for altcoin funds.

On Wednesday, the US House of Representatives passed the FIT21 bill, a sweeping piece of legislation to govern digital asset markets. The bill garnered support from 71 Democrats, which is important because the party has been less supportive of crypto in the past.

The bill still needs to pass the Senate, and President Biden has signalled he doesn’t like the legislation. The White House said it would work with Congress to develop a regulatory framework for the industry.

Is that enough to make Solana a real contender?

Not for a while, say sceptics.Then again, it was only a few months ago when the prospect of an Ethereum ETF seemed the longest of long shots.

Liam Kelly is a Berlin-based DL News’ correspondent. Contact him at liam@dlnews.com.

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