Opinion: Why is the SOL ETF so hard to wait for?

Original author: 0xTodd, Ebunker I hold a pessimistic view on Lianchuang, mainly because: 1. The ETF fee rate is too low 2. The market value of $ SOL is also low 3. The number of institutions/retail investors willing to hold SOL naked is small ( Staked SOL APR is as high as 8 %, compared with -0.2% for ETFs). The product of the three may not be enough to cover the fees of these ETF issuers. If everything goes smoothly, you can go up, but if there is strong resistance from behind, you will most likely have to withdraw. After all, if you don’t make money, there is no motivation to promote. There is a metaphor that is not very vivid. Now it is similar to - I am ready to repeat the college entrance examination, but it does not prevent me from applying for Tsinghua University and Peking University as my first choice. As for why he has a more pessimistic view on the adoption of the Solana ETF, 0xTodd gave a more detailed explanation in early June. The full text is reproduced by Rhythm BlockBeats as follows: Why is it so difficult to wait for the SOL ETF? Because it might not make money. Last week, Cathie Wood’s Ark Fund decided to withdraw its ETH ETF application.

Ark BTC ETF ranks 4th (market share 6%, Top 3 are BlackRock, Grayscale and Fidelity), but according to market speculation, it is "not very profitable". The main reason is that the fee rate of BTC ETF is relatively lower than that of traditional ETF, many of which are in the range of 0.19-0.25%. ETFs are also engaged in "fee rate competition."

A simple estimate is that based on the current scale of Ark BTC ETF, it can earn about 7 million U.S. dollars in management fees a year, so the corresponding costs are probably of the same order of magnitude. Therefore, if the Ark BTC ETF is still hovering near the profit line, then for Ark, pushing the ETH ETF may turn into a loss-making transaction.

Purely from a business perspective, mainstream currencies with lower market capitalization, such as $SOL, have a market capitalization of 5% of $BTC. To recover the annual cost of US$7 million, an ETF must manage at least 20 million SOL.

BlackRock, currently the top crypto ETF, only manages 1.5% of the BTC on the entire network, while 20 million SOL means it accounts for 4.5% of the paper circulation of $SOL.

In addition, consider:

(1) SOL is naturally more difficult to raise than BTC which has no interest. SOL's on-chain income can reach about 8%, but ETFs are prohibited from including staking functions. Holding the SOL ETF is equivalent to naturally underperforming the on-chain SOL by 8%, and Bitcoin only underperforms the management fee by 0.2%.

Take Grayscale as an example. The peak number of G BTC is 600,000 pieces, but the peak number of SOL is only 450,000 pieces, which is seriously lower than that of BTC.

(2) The paper circulation of SOL is 460 million, and the actual circulation may be lower.

The lower circulating market capitalization requires institutions to hold larger positions under high interest rates and regulatory pressure. Therefore, with SOL's current market value and circulation, it is difficult for institutions to make profits.

Business interests come first, buying and selling at a loss, who promotes it?

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