JPMorgan analysts anticipate that spot Solana exchange-traded funds (ETFs) are likely to receive regulatory approval soon. However, the investment bank projects that these products will attract significantly less capital than their Bitcoin and Ethereum counterparts, estimating approximately $1.5 billion in net inflows during their first year of trading.
The forecast comes as the U.S. Securities and Exchange Commission (SEC) prepares to rule on nearly 16 different spot crypto ETF applications this month. The final deadline for a decision on spot Solana ETFs is October 10, with many industry observers expecting a positive outcome.
Key Takeaways
- JPMorgan analysts believe the approval of spot Solana ETFs is highly probable, citing the existence of a CME futures market for the asset.
- The bank forecasts approximately $1.5 billion in net inflows for Solana ETFs in their first year, a modest figure compared to Bitcoin and Ethereum products.
- This projection is based on comparative analysis of existing fund flows and the relative size of Solana's DeFi ecosystem versus Ethereum's.
- Potential headwinds for Solana ETFs include weaker investor perception, declining on-chain metrics, and competition from other investment products.
High Probability of Regulatory Approval
According to a report from JPMorgan analysts led by managing director Nikolaos Panigirtzoglou, the path to approval for a spot Solana ETF appears relatively clear. The analysts point to several factors that support this outlook.
A key indicator is the existence of an established futures contract for Solana on the Chicago Mercantile Exchange (CME). This regulated market provides a foundation for price discovery and surveillance, which has been a critical element in the SEC's approval process for other crypto ETFs.
"The strong likelihood of approval for Solana spot ETFs is reinforced by the fact that there is an already established futures contract at CME," the JPMorgan report stated.
The SEC has also recently streamlined its application process by introducing generic listing standards. This change has removed the need for token-specific filings and has encouraged a wave of new crypto ETF proposals for assets like Solana and XRP.
Market Indicators Align with Approval Expectations
Further evidence comes from the market behavior of the Grayscale Solana Trust (GSOL). The premium of GSOL's share price to its net asset value (NAV) has collapsed from a high of over 750% last year to a level just above zero today.
JPMorgan analysts noted that this pattern is consistent with what was observed in Grayscale's Bitcoin and Ethereum trusts before they were permitted to convert into spot ETFs. The narrowing premium suggests that investors are anticipating an easier, more direct way to gain exposure to Solana's price.
Background on Crypto ETFs
Exchange-Traded Funds (ETFs) are investment funds that trade on stock exchanges, much like stocks. Spot crypto ETFs hold the underlying digital asset directly, allowing investors to gain exposure without having to buy and custody the cryptocurrency themselves. The launch of spot Bitcoin ETFs in early 2024 was a landmark event, attracting billions in investment and legitimizing the asset class for many traditional investors.
Projected Inflows Remain Limited
While approval seems probable, JPMorgan's analysis suggests that investor enthusiasm for a Solana ETF may be restrained. The bank's projection of $1.5 billion in first-year net inflows is a fraction of the capital attracted by similar products for larger cryptocurrencies.
For context, spot Ethereum ETFs (excluding Grayscale's converted fund) gathered $2.3 billion in their first three months alone, with total first-year inflows reaching $9.6 billion. The Solana forecast represents just one-seventh of that amount.
Inflow Projections Compared
- Solana ETFs (JPMorgan Forecast): ~$1.5 billion in first year
- Ethereum ETFs (Actual): $9.6 billion in first year
- Bitcoin ETFs (Actual): Over $15 billion in net inflows since January 2024 launch
Basis for the Conservative Estimate
JPMorgan's analysts derived their $1.5 billion estimate using a comparative methodology. They examined the early flows into the REX Osprey Solana ETF, a product registered under the Investment Company Act of 1940 that launched in July. This fund has attracted nearly $350 million since its inception.
When comparing this to the $2.3 billion that flowed into spot ether ETFs during their initial three months, a ratio of approximately one-to-seven emerges. The analysts applied this same ratio to Ethereum's total first-year inflows to arrive at the Solana projection.
"A similar ratio emerges if one looks at the relative size of Solana’s DeFi TVL to that of Ethereum," the analysts wrote, indicating that the network's smaller decentralized finance ecosystem supports the more modest inflow expectation.
Potential Challenges Facing Solana ETFs
The JPMorgan report cautioned that even the $1.5 billion forecast might be optimistic, citing several factors that could dampen investor demand for Solana-based financial products.
One primary concern is the investor perception of Solana relative to Ethereum. Ethereum is widely regarded as the dominant smart contract platform and the foundation of the decentralized finance (DeFi) ecosystem. Solana, while a strong competitor, has not yet achieved the same level of institutional and retail recognition.
On-Chain Activity and Network Usage
Analysts also pointed to declining on-chain activity as a potential red flag. Key metrics such as the number of active addresses on the Solana network have been falling since November 2024, which could signal waning user engagement.
Furthermore, a significant portion of Solana's on-chain activity has been driven by the trading of memecoins. While this has generated high transaction volumes, it may not translate into the long-term, stable investment demand that typically supports institutional products like ETFs.
Other potential headwinds identified by the bank include:
- Investor Fatigue: The market may be saturated after numerous high-profile launches of Bitcoin and Ethereum ETFs.
- Increased Competition: Investors now have access to diversified crypto index funds and corporate treasury products that offer yield, providing alternatives to single-asset ETFs.
- Muted Futures Demand: Demand for CME Solana futures has been less robust compared to Bitcoin and Ethereum, suggesting lower institutional interest.
It is worth noting that this forecast contrasts with an earlier, more optimistic projection from a different JPMorgan team. Analysts led by Kenneth B. Worthington had previously estimated that Solana ETFs could attract between $2.7 billion and $5.2 billion in net flows within six to twelve months of approval.
