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

In the wake of the spot Bitcoin And ether ETF approvals, there has been a lot of speculation about which cryptocurrency might be next. A few names have already 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. In my view, there are two key factors that make this likely.

Market demand

In terms of market capitalization, Solana ranks fifth among all major cryptocurrencies. This is a crucial factor because market capitalization can be useful as an indicator of investor demand. As a rule of thumb, Wall Street will not launch a product unless there is enough demand for it, so it is worth investigating what the demand is from both retail and institutional investors.

In late June, crypto investment firm GSR crunched the numbers and concluded that Solana lagged only behind Bitcoin and Ethereum in terms of total demand. The firm's “demand analysis” took into account three key factors: (1) market capitalization and total trading volume, (2) assets under management of investment products already on the market, and (3) the size, activity, and reach of the online community for a given token. In all of these metrics, Solana outperformed rivals XRP, Cardano, and Avalanche.

There's also great data from CoinShares, which tracks institutional investor inflows in and out of major cryptocurrencies. According to its 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 inflows. However, investor inflows into Bitcoin and Ethereum dwarf anything currently happening with Solana.

Regulatory outlook

Of course, there's no way a Solana ETF will be approved if regulators have doubts about whether Solana is actually a security. This was the only factor standing in Solana's way for much of the past year. But in late July, the SEC seemed to back down from its previous stance when it admitted it would no longer review Solana as a potential security. If you're hoping for a Solana ETF, this is exactly what you want to see.

In addition, it's important to keep an eye on what's happening in other financial markets beyond the U.S. borders. In August, for example, Brazilian regulators approved a spot Solana ETF. If that goes well in Brazil, it could make it much easier to get a U.S. version of the ETF approved. And in fact, investment firm VanEck – one of only two firms that have already filed a spot Solana ETF application with the SEC – is now saying a Solana ETF is “inevitable.” I wouldn't go that far, but things are looking good for Solana at the moment.

What to look out for in 2024

As we saw with the recent mini market crash in early August, there is still quite a bit of volatility in the crypto market. Any sustained sell-off over the next few months would likely push back the launch date of a Solana ETF, simply due to a lack of investor demand for the product. Furthermore, it is unlikely that the SEC will approve anything if the crypto market shows signs of weakness or if demand for existing crypto ETFs dries up.

So keep an eye on the overall health of the crypto market as well as investor inflows into the Bitcoin and Ethereum ETFs. If the trend is positive, I am much more optimistic about the launch of a Solana ETF in early 2025. And if the pro-crypto sentiment continues after the 2024 presidential election, I would be even more optimistic.

However, Solana is a high-risk, high-potential crypto investment, so if you're thinking about investing in Solana, make sure you do your due diligence. Investing in a Solana ETF would help mitigate some of that risk, but it can't completely eliminate the risk of holding Solana.