In the ever-evolving realm of cryptocurrency, Katalin Tischhauser, the astute head of investment research at Sygnum Bank, has stepped into the fray with a cautionary perspective. Joining a chorus of analysts, she casts a shadow of doubt over the potential for spot ETFs featuring Solana and Cardano to gain traction in the United States. Though some, like VanEck, maintain a glimmer of hope, the obstacles appear daunting.
When it comes to getting altcoin ETFs approved in the U.S., the landscape seems particularly bleak. According to Tischhauser, the primary roadblock lies in the SEC’s stringent requirements. The commission is deeply committed to guarding against market abuse, fraud, and manipulation, which means it demands a reliable surveillance framework—something the current state of crypto exchanges simply cannot provide.
“The SEC is looking for regulated trading venues to ensure market integrity,” she explained, referencing the Chicago Mercantile Exchange (CME) as a benchmark for fair and transparent practices. “The availability of CME futures for Bitcoin and Ethereum was a workaround, but the SEC currently considers crypto exchanges as ‘unregulated securities exchanges.’” This makes the path for altcoin ETFs fraught with challenges.
The Demand Dilemma
Even if regulatory hurdles were to be surmounted, Tischhauser remains skeptical about the demand for altcoin ETFs. “Honestly, we don’t think there’s going to be significant interest beyond Bitcoin and Ethereum,” she remarked. “While Ethereum’s name recognition is impressive, it pales in comparison to Bitcoin’s iconic status. Other tokens like Solana are barely recognized outside crypto circles.”
To paint a clearer picture, consider the data: Since their debut in January, spot Bitcoin ETFs have drawn in a whopping $17.7 billion, a clear testament to the demand for Bitcoin as an asset class. In contrast, the journey for spot Ether ETFs has been a rocky one, characterized by initial outflows due to a shift from the Grayscale Ethereum Trust. Yet, hope is on the horizon; recent trends show a positive turn in aggregate flows as of August 1.
Tischhauser points to the premium on Grayscale’s Solana Trust (GSOL) as an indicator of some level of demand, but it’s crucial to note that GSOL’s assets under management are a mere $78.6 million—about 1.2% of the staggering $6.3 billion held by its Ethereum Trust (ETHE). The stark contrast highlights a significant gap in interest.
This sentiment is echoed by BlackRock’s own heavyweights, Samara Cohen and Robert Mitchnick. They shared a similar outlook in July, with Cohen asserting that a spot ETF for altcoins like Solana isn’t on the immediate horizon. Mitchnick succinctly summed it up: “I don’t think we’re gonna see a long list of crypto ETFs.”
A Contrarian View from VanEck
Not everyone is riding the pessimistic wave, however. Matthew Sigel, the head of digital assets research at VanEck, offered a refreshing counterpoint during a July 31 interview. “We disagree with the notion that Bitcoin and Ethereum will be the only ETFs,” he declared confidently. “The European market is already home to a variety of crypto ETPs, from single coins to baskets. We aim to lead this innovation in the U.S. as well,” he added, referencing VanEck’s recent filing for a Solana ETF on June 27.
As the tides of the cryptocurrency market continue to shift, aggregate flows for spot Ether ETFs have recently flipped back to positive territory. On August 1, Grayscale’s ETHE fund experienced its smallest outflow to date, with only $78 million exiting, culminating in a total inflow of $28.5 million for the day.
In this tumultuous crypto landscape, the future of altcoin ETFs remains uncertain. As regulators and investors navigate the complexities, only time will tell if Solana and its counterparts can break through the barriers and emerge from the shadows of Bitcoin and Ethereum. The journey is fraught with unpredictability, but the potential rewards are undeniably tantalizing.