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Solana ETFs and huge SOL get a real chance under Donald Trump, says GSR
Under the Biden administration, Solana (SOL) it doesn’t appear anywhere close to getting its own ETF in the U.S. But, according to market-making firm GSR, if Donald Trump takes back the White House, he may be closer than many observers think and from a price perspective they would have a lot more advantage of bitcoin (BTC) it did when its spot ETF debuted.
The US presidential election could be a turning point for other crypto ETFs like SOL, according to research note shared with CoinDesk. If Trump becomes president again, he could upend the established script for launching crypto ETFs, which usually takes years and begins with the introduction of federally regulated futures contracts, something Solana lacks.
It “may also be likely” that his administration would theoretically implement lax digital asset regulations that would allow the launch of “a myriad of spot digital asset ETFs,” the note said. If this happened, SOL, one of the largest crypto assets behind BTC and Ethereum ether (ETH) (which already have US ETFs), could be the first to benefit.
“Solana is ready for a spot ETF if and when additional digital asset spot ETFs are permitted in the US, and the price impact could be the largest yet,” the market maker said in a note.
Solana is one of the few cryptocurrencies with strong market demand whose network also has a high degree of decentralization, according to GSR’s internal calculations. The market maker said these attributes should drive the willingness of potential ETF issuers to pursue a listing.
Bitcoin’s price more than doubled in the months before and after the spot ETF’s launch, GSR said. If SOL sees just 5% of BTC inflows, its price could more than triple. GSR considered this inflow rate a “base case” because Solana Investment Products saw 5% of bitcoin inflows between 2021 and the end of 2023, before crypto ETF fever took hold.
“Blue sky” inflow rates of 14% could see Solana’s price rise almost ninefold, according to the GSR note. The figures are only a fraction of those for bitcoin, but given Solana’s smaller size they have much greater potential for price action.
There is no ETF price action for Solana without a Solana ETF. And the asset didn’t check the all-important box of having traded for years in a federally regulated futures market, as bitcoin and ether have (widely expected to soon have their own ETF). This means we are years away from launch under the current playbook.
“All you really need is for Donald Trump to become president and then you will be subject to whatever he wants to do,” said GSR Senior Strategist Brian Rudick, who wrote the memo.
If Trump wins the election and keeps his campaign promises regarding cryptocurrencies, he could make the necessary changes for SOL to have a near-term chance of becoming an ETF.
But that’s a big if. And the market hasn’t exactly signaled the adoption of that “if,” if you’re referring to a niche metric for tracking the likelihood of various crypto ETF launches, the pricing discrepancy for Grayscale’s crypto trust products.
“If there was a better chance of a SOL ETF, we would see the price of Grayscale Solana Trust (GSOL) collapse,” he said.
As of this writing, GSOL was trading at a premium of about 750% to net asset value, a staggering discrepancy that Rudick said would collapse if Grayscale converted it to an ETF, as its Grayscale Bitcoin Trust did (GBTC) when it became an ETF.
Rudick cautioned that the comparison is not ironclad because GSOL doesn’t have much liquidity, meaning its holders don’t have too many buyers willing to sell their overpriced trust shares.