Canary Capital Joins the Solana ETF Race Amid Growing Demand for Crypto ETFs

Canary Capital has filed an application with the U.S. SEC to launch a spot Solana ETF.

Amid rising demand for crypto ETFs, Canary Capital filed an application with the U.S. SEC to launch a spot Solana ETF. The Nashville-based firm will propose a spot Solana ETF targeting the fast-growing blockchain platform Solana.

In other words, the Solana ETF would track the performance of SOL without investors holding the asset directly, providing easy and accessible investment exposure within the context of traditional brokerage accounts.

Expanding the Scope of Crypto Investments

The proposed creation of a Solana ETF would not be the first crypto ETF attempt by Canary Capital. The company filed earlier in October for spot ETFs for both XRP and Litecoin, a signal of its intent to provide access to a range of digital assets. If approved, these would allow investors to play in the cryptocurrency space without the hassle or risk associated with holding the digital assets themselves. The ETFs instead would track the price of the underlying cryptocurrencies through now-established indices, such as CME CF Solana Index, which offers real-time pricing and an even lower-risk vehicle for investors.

Crypto-based ETFs have been rising in popularity, especially after the recent approval of the SEC for a spot Bitcoin and Ethereum ETF. That opened new horizons both for institutional and retail investors.

Solana’s Position as a Leading Blockchain Network

Indeed, Solana has emerged as one of the hot blockchains for dApps and DeFi applications, right alongside Ethereum. Having some of the lowest transaction fees, coupled with super-fast transaction times, volumes are attracted to its blockchain with a very high level of transaction activity and an enormous number of active addresses. Its blockchain is also notable for its technical efficiency; thus, it has become a popular base for many decentralized finance projects, meme coins, and NFTs.

Canaccord Genuity has also named Solana as one of the most prospective ETFs due to its large DeFi ecosystem and low-price transaction environment, according to Canary Capital. Canary underlined that sustained on-chain activity with an ever-growing user base allows for strong conviction behind institutional interest. Solana has already passed Ethereum and Binance Chain in active address market share—even with Ethereum’s Layer 2 solutions considered on the platform.

Regulatory Hurdles: Will the SEC Approve a Solana ETF?

All these ambitious plans notwithstanding, the general approach of the SEC towards cryptocurrency ETFs has been cautious, particularly with assets other than Bitcoin and Ethereum. The regulatory body has labeled SOL as a security in past cases, including its lawsuit against Binance in 2023, which raises additional challenges for Solana-focused products. Analysts suggest that while the SEC has shown a willingness to approve ETFs for Bitcoin and Ethereum, it may be more reluctant to greenlight products for less decentralized networks like Solana, given its smaller pool of validator nodes.

Source: X

Canary is not the only firm vying for a Solana ETF. Asset managers VanEck and 21Shares submitted similar applications in June, with both firms also offering Bitcoin and Ethereum ETFs. Franklin Templeton has also shown interest in Solana, indicating that the demand for ETFs covering a broader range of digital assets is on the rise. However, these applications must contend with regulatory scrutiny, as the SEC remains stringent in assessing digital assets for potential network vulnerabilities and investor risks.

Potential Market Impact and Institutional Adoption

A spot Solana ETF, if approved, would dramatically expand the availability and visibility of SOL to institutional as well as retail investors. An ETF will make it easier for investors to avoid the complications associated with actually buying and storing digital assets, offering price exposure to Solana through a traditional brokerage account.

Already, anticipation of an ETF approval has affected market sentiment for Solana, with some analysts speculating that the potential approval might cause SOL to appreciate in price considerably. This may play out just like Bitcoin and Ethereum, whose respective ETF approvals increased demand and liquidity within their markets. A successful ETF will serve as a catalyst to more adoption and increased interest in the blockchain technology underpinning it, not to mention interest from institutional players requiring regulated investment paths into the asset.

The Influence of U.S. Elections on Crypto Regulation

With the U.S. presidential election drawing near, the crypto market is in for the huge potential for regulatory changes. This could affect how the SEC would act regarding cryptocurrency ETFs and, more importantly, its policies on digital assets.

 Not too long ago, Bloomberg’s Senior ETF Analyst Eric Balchunas said victory for pro-Bitcoin candidate Donald Trump could be a good indicator of the regulatory environment for crypto and may even speed up the pace of approvals for new digital asset products. In contrast, a Kamala Harris administration may maintain the current cautious stance under SEC Chair Gary Gensler, potentially delaying decisions on Solana and other crypto ETFs.

Meanwhile, international markets are taking a more progressive approach. For example, Brazil recently approved a Solana ETF, positioning itself as a potential testing ground for crypto ETFs, while U.S. investors face longer wait times due to regulatory complexities.

Canary Capital’s ETF Boosts Solana’s Price

Solana (SOL) price chart. Source: Brave New Coin 

After Canary Capital filed its Solana ETF, there was a brief but noticeable boost in Solana’s market performance. The announcement initially sparked a surge in Solana’s price, reflecting a burst of investor enthusiasm. Yet, as market dynamics played out, the price underwent a natural correction, stabilizing after the initial excitement. Data from BeInCrypto reveals a slight drop of 3.32% following this adjustment, with Solana trading at around $175.01 at the time of reporting.

At the center of attention now is whether Solana can successfully breach the $180 resistance level. This mark has proven challenging, and investors are keenly watching to see if Solana’s current momentum can push it past this critical point. The next major milestone lies just above, with Solana’s 7-month high of $202 as a potential target.