In a surprising twist for cryptocurrency enthusiasts, Solana’s native token, SOL, has surged to $161 following the announcement of its first-ever exchange-traded fund (ETF) with staking capabilities. This news ignited a spark of hope among traders, raising questions about whether this rally is merely a fleeting moment or a sign of a more substantial upward trend.
However, while the initial excitement surrounding the Solana ETF launch is palpable, the underlying fundamentals suggest that this rally may not be sustainable. Institutional demand for SOL remains weak despite the positive news, indicating that traders should tread carefully. The Solana ETF, developed by REX Shares in partnership with Osprey Funds, allows for a faster launch due to its unique structure, which avoids the typical U.S. SEC approval process. Unlike traditional cryptocurrency ETFs, this structure taxes dividend income at both the corporate and investor levels, which could deter some potential investors.
After peaking at $161, SOL adjusted to $157, which still marks a 4% increase from the previous day. Yet, traders rapidly recalibrated their expectations as it became evident that similar ETF instruments could be launched for almost every altcoin, diluting Solana’s first-mover advantage.
The disparity in institutional demand is evident when comparing Grayscale’s Solana Trust, which has around $75 million in assets under management, to Grayscale’s Ethereum Trust which, at a similar point before the Ethereum ETF launch, boasted $10 billion. This stark contrast highlights the skepticism surrounding Solana’s future potential.
Additionally, ongoing SOL unlocks and pressures from decentralized applications (DApps) have contributed to a cautious market atmosphere. Over the next two months, approximately $585 million worth of SOL will be unlocked from staking, potentially leading to increased sell-offs. Furthermore, significant DApps have previously dumped substantial amounts of SOL onto exchanges, exemplifying the selling trend. All these factors cumulatively impact SOL’s performance, which has largely matched that of competitors like ETH and BNB over the past month, despite the bullish ETF news.
The futures funding rate for SOL gives further insight into trader sentiment. Even with a 12.5% gain over four days, the funding rate has not exceeded the neutral threshold of 10%. This lack of bullish momentum coupled with SOL’s current price being 47% below its all-time high of $295 indicates a stagnant market environment. Onchain data reveals a troubling decline in Solana’s network activity, with a drastic drop in network revenue of over 90% since January.
In a competitive landscape, projects like Robinhood selecting Ethereum’s layer-2 solutions for tokenized stock trading and Coinbase partnering with Shopify for onchain payments have further undermined Solana’s standing as a leader in high-output DApps. At this point, the evidence suggests that the recent Solana ETF launch will unlikely drive SOL’s price to $200, given the prevailing competition and lack of robust institutional interest.
