Solana Outflows Hit All-Time High At $39M, SOL ETF In Jeopardy?

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As a seasoned analyst with over two decades of experience in the financial markets, I’ve witnessed numerous ebbs and flows that shape the investing landscape. The recent surge in Solana (SOL) outflows to an unprecedented $39 million is yet another testament to the unpredictable nature of the crypto market.

Last week, outflows from Solana (SOL) reached a peak of $39 million, marking a new record. This increase coincides with broader market shifts prompted by recent economic data releases. Additionally, it could potentially amplify the regulatory doubts surrounding proposed Solana spot ETFs by VanEck and 21Shares.

Solana Outflows Surge Unprecedentedly

Large-scale withdrawals from Solana have caught the attention of many in the cryptocurrency world. A massive $39 million outflow from Solana investment products sets a new record, as reported by CoinShares. This significant withdrawal is believed to be due to a substantial drop in trading activity for meme coins, a sector that Solana heavily depends on.

Last week, while Solana faced substantial outflows setting new records, various other cryptocurrencies had mixed results. On the whole, digital asset investment products recorded only minor inflows worth around $30 million last week. This relatively small amount masks considerable differences in performance across diverse assets and geographical areas.

Bitcoin (BTC) received a total of $42 million from investors last week, showing continued belief in Bitcoin ETFs and its price. On the other hand, investments in short-Bitcoin ETPs decreased for the second week in a row by $1 million, suggesting that investors are currently less interested in betting against BTC’s performance.

Simultaneously, Ethereum (ETH) witnessed investments worth $4.2 million, while Solana recorded outflows. But this figure hides a bustling activity among providers. Newcomers poured $104 million into the Ethereum ETF sector. Conversely, Grayscale’s Ethereum-related products saw a large withdrawal of $118 million.

SOL ETF Approval Faces Trouble

In light of the ongoing Solana withdrawals, the ambiguity regarding potential Solana ETFs has intensified the pessimistic outlook. Notably, the filings for VanEck and 21Shares’ Solana ETFs were taken down from the Chicago Board Options Exchange (Cboe) site, causing worry about the approval process and future of these investment vehicles.

Filing the S-1 forms for spot Solana ETFs in late June sparked debate about the Securities and Exchange Commission’s (SEC) position regarding these financial products. The move came after the SEC provided clear guidance on approvals for nine Ethereum ETFs, which had been previously filed.

Instead, the SEC did not send filing confirmations for these SOL ETFs, which sparked discussions among industry experts about whether the 19b-4 submissions were withdrawn or denied. To clarify, the 19b-4 filing is a crucial step in the approval process for Exchange-Traded Funds (ETFs).

The filing informs the SEC of a proposed rule change by a self-regulatory organization such as an exchange. After such filings, the SEC typically opens a 240-day window to make a decision.

As an analyst, I’m sharing Scott Johnsson’s perspective: “Gary Gensler, presumably, informed Cboe that the SolidX Bitcoin Trust (SOL) applications were inappropriately submitted as Commodity-Based Trust Shares. This is likely due to his belief that SOL does not qualify as a commodity, which would bypass the necessity for the SEC to issue a formal written disapproval order.”

Meanwhile, Nate Geraci, President of ETF Store, also verified that they are withdrawing their ETF applications. Additionally, he voiced doubts about the potential approval of Solana ETFs within the existing regulatory framework. Furthermore, recent outflows from Solana have increased apprehension as the desire for Solana investment products appears to be waning.

Previously, Matthew Sigel, who leads Digital Assets Research at VanEck, voiced criticism towards U.S. regulators, stating they are falling behind countries such as Brazil, which have already approved spot SOL ETFs. He advocated that the U.S. should adopt a more lenient regulatory approach, or a “soft fork,” in order to expedite Solana ETF approval.

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2024-08-19 13:18