The emergence of exchange-traded funds (ETFs) shows that the crypto market is maturing. Notably, crypto ETFs are not limited to only Bitcoin and Ethereum. Instead, Solana ETFs have been introduced in recent months.
This article teaches everything you need to know about Solana ETFs and the benefits of investing in them.
The Solana Coin
Solana (SOL) entered the market in 2020 with a starting price of $0.5. A year later, it peaked at $259. However, in 2022, the coin plummeted significantly after cryptocurrency exchange FTX collapsed. Solana traded below $10 in early 2023, causing some analysts to claim that it was the end of the digital asset.
However, SOL started rallying later that year, hitting $200 in April 2024. Its massive recovery has attracted the interest of ETF issuers worldwide. It is worth pointing out that American authorities have yet to approve Solana ETFs. However, countries like Germany and Canada have already given the green light to such ETFs.
Here is why many ETF issuers believe that Solana ETFs have a huge potential:
1. The Solana blockchain is popular among meme coin creators.
2. Crypto analysts remain optimistic that SOL can hit $500 over the coming months.
3. The Solana Foundation has formed strategic partnerships with several well-known companies like Circle, which recently injected over $250 million into Solana, thus boosting the blockchain’s liquidity.
What is a Solana ETF?
A Solana ETF is an investment fund that trades on traditional stock exchanges. It tracks the performance of SOL, allowing investors to invest in the digital coin in a regulated manner. Solana ETFs are ideal for individual and institutional investors who want to invest in Solana without holding the actual digital asset.
So, how can you invest in Solana ETFs? As mentioned, these ETFs trade on conventional stock exchanges. That means investors can use their brokerage accounts to buy shares of the exchange-traded funds. Note that shares of Solana ETFs tend to be more volatile than traditional stocks due to their connection with crypto.
How Solana ETFs Are Created
Here is how a Solana ETF enters the market:
1. Initiation by Authorized Participant (AP): An AP is a financial institution that creates shares of a Solana ETF.
2. Solana deposits: After creating shares, the AP transfers Solana tokens, which back the shares, to the custodian of the ETF.
3. Market introduction: When there is enough Solana backing the ETF shares, the AP introduces the Solana ETF to the market for investors to trade.
Types of Solana ETFs
There are two types of Solana ETFs, including:
1. Spot Solana ETFs: These mirror the price movement of Solana in the spot markets.
2. Futures Solana ETFs: Issuers of these ETFs invest in Solana futures contracts. A Futures ETF has a higher chance of being approved than a spot ETF.
Issuers of Solana ETFs
As stated, several Solana ETFs are already in the market. Some of the well-known issuers of these ETFs include:
1. 3iQ Digital Asset Management: This asset manager issues the QSOL ETF, which trades on the Toronto Stock Exchange.
2. VanEck: The firm’s German subsidiary issues the VanEck Solana ETF, which can be traded on the Deutsche Börse exchange.
3. WisdomTree: The company’s WidomTree Physical Solana ETF is available for trade on several European stock exchanges.
4. 21Shares: Swiss investors can trade the 21Shares Solana Staking ETF on the SIX Swiss Exchange.
Solana ETF Fillings in the United States
Numerous asset managers have filed for a spot Solana ETF with the Securities and Exchange Commission this year. They include:
1. VanEck: The company has proposed the VanEck Solana ETF.
2. 21Shares: If approved, 21Shares’ exchange-traded fund will trade as Core Solana ETF.
Benefits of Investing in Solana ETFs
There are several advantages of investing in a Solana ETF. Some include:
1. Deep liquidity in the stock exchanges, which facilitates smooth trading.
2. Solana ETF allows investors to diversify their portfolios.
3. Solana ETFs are issued by regulated companies.
4. ETF investors do not have to worry about the complex process of setting up a crypto wallet to store Solana.
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