After Receiving Key Signals, Solana (SOL) May Be the Next Cryptocurrency to Launch a Spot ETF

The U.S. Securities and Exchange Commission (SEC) recently released key signals that may accelerate the approval process of Solana ETF.

The U.S. Securities and Exchange Commission (SEC) has recently requested several asset management companies to submit updated registration documents (Form S-1) for their Solana ETF applications within seven days, according to a report by Blockworks, citing people familiar with the matter.

The SEC specifically requested revisions to the terms regarding “physical redemption” and “pledge mechanism,” and hinted that the Solana ETF may be allowed to include a pledge income function. This development was interpreted by the market as a positive shift in regulatory attitudes.

Following the news, the SOL price increased by 5% over the past day to reach over $165, but later pulled back to around $163.6 by the time of writing.

The core revision requirements proposed by the SEC this time mainly focus on two aspects: the language of in-kind redemptions and how the issuer will handle the staking issue. For investors:

In-kind redemption: This means that ETF unit holders can choose to directly receive SOL tokens of equivalent value instead of cash when redeeming their fund units. This mechanism is generally considered to be more advantageous than cash redemption in terms of tax efficiency and operational flexibility, and is more attractive to investors.

Staking: Solana is a blockchain that uses the Proof of Stake (PoS) mechanism, which allows its token holders to participate in network verification and receive rewards by “staking” tokens. If the SEC allows the inclusion of a staking mechanism, it means that investors who purchase ETF shares can not only gain benefits from price increases, but also indirectly enjoy staking rewards, which will greatly increase the attractiveness of the SOL ETF and make it an investment product with more diverse income potential.

The lineup of institutions applying for this product is also very luxurious, including the original team of Bitcoin ETFs such as Fidelity, VanEck, and Grayscale. It is worth noting that Grayscale plans to convert its existing SOL trust product into a spot ETF, replicating its successful path in Bitcoin and Ethereum ETFs.

Market observers pointed out that CME exchange launched Solana futures in February 2024. This "pre-emptive action" is highly similar to the process before the approval of Bitcoin and Ethereum ETFs, further strengthening the expectation of approval.

Optimistic approval timeline: as early as July?

Sources expect that once these S-1 filings are updated, the Solana ETF could receive final approval within the next three to five weeks.

James Seyffart, a senior ETF analyst at Bloomberg, is also very optimistic about this. He said he expects approval to come this year, or even as early as July. Although the SEC's final deadline for 19b-4 filings (listing rule change applications) for these products is in October, Seyffart believes that the SEC may now prioritize applications for Solana and pledged ETFs, which means that the final decision may come earlier than originally planned, which requires issuers and industry participants to closely cooperate with the SEC and its crypto task force to jointly develop relevant rules.

In April, Bloomberg Industry Research analyst Eric Balchunas said that he had raised the probability of SOL ETF approval from 70% to 90%. In his latest tweet, he said: "Get ready for a potential altcoin ETF summer, Solana may lead the trend (and some basket products)."

SOL Short-term Trend

If we refer to the historical experience of Bitcoin ETF, within three months after the approval of Bitcoin ETF, the price of BTC has increased by about 60%. If Solana replicates this increase, its price is expected to hit the range of $250-300 at the current price of $160. However, this optimistic expectation needs to be viewed with caution - the case of Ethereum ETF has proved that approval may not directly drive a sharp rise in the price of the currency.

From a technical perspective, crypto analyst Grayhoood observed that SOL technical indicators such as RSI, Stochastic Oscillator and Commodity Channel Index (CCI) all sent positive signals, especially after SOL broke through the $154 resistance level, indicating that buyer power is increasing and prices still have room to rise.

From a long-term perspective, the 30-day and annual moving averages (down 5.3% and 2.9% respectively) still show that the recent gains have not completely reversed the previous bearish structure. If it can continue to break through, the upper resistance is around $181/187/194.