Is the US Solana ETF Approval Chances Dead? with James Seyffart

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me is James Seyferd, who's an ETF research analyst at Bloomberg. James, great to see you.

any of this. I mean, if you if you look at anything, I mean it's it's Honestly, I said this on Twitter, which like some people jump down my throw for but it kind of reminds me of the way things were trading in twenty twenty before COVID and then even right after, like it just kept hitting like that, you know, right around that eleven twelve K mark down to seven and so on, and like that that happened for like eighteen months straight, it felt like, and that's

what it feels like this to me kind of I know it hasn't been quite that long yet, but it just that same range kind of feel similar. It's like that fifty fifty five to like near seventy just keeps happening, and it's like we're just keep hitting sixty and fifty eight over and over and over again. And it just feels like how it felt to me when I kept hitting, like staying right around ten k. It just feels similar.

And obviously, like when you're thinking about this, like I never like to look to the historical price action for what's actually going on. It's just the vibes feel very similar to me. People were very down and out on the prospects for the market in general, specifically bitcoin, and yeah, people were still building, so I guess we'll see what happens in the coming months, but yeah, I think we're just kind of in this sideways choppy market right now and time will tell what happens next.

percent cut before the end of twenty twenty five. That's currently what markets are pricing. But you said sell a man, go away, and ironically that probably would have been pretty good for crypto, but not for socks socks off. It's done I done pretty well. So it's not all risk assets that are that are fitting that this year.

outflows that we just saw. And that's typically the way that we see categories grow in the ETF world. Right like they're going to go up and down with prices and money will come in and out. But theoretically, a real healthy market, you're going to see those asset levels and those flows over the long term tend to go up, and that's what we're seeing. We're not seeing that with ethereum. So the Ethereum ETFs launched in July and they have

had negative let me get you the exact number. They've had negative, like almost five hundred million dollars in olflows. Actually over five hundred million dollars in outflows. So with the bitcoin ETFs we had, we called them the newborn nine, these other spot ETFs besides GPTC that had enough demand to overwhelm the outflows from the unlocking of the GBTC shares,

the gray scale GBTC shares. We are not seeing these other new eight ETFs or seven ETFs from the Ethereum side of things to overwhelm the unlock and selling of shares of ETH. So we've seen net alflow since launched. So we were relatively bare. So our our view was like fifteen twenty percent was what we thought was going to happen. Twenty percent was my number. Al chun Is, my boss, thought fifteen percent of the flows that bitcoin ETFs saw, we thought theorem metos would see over the

first six to twelve months. I think I probably said that on here Man I was there are nowhere near that. So there's there's a few things we just talked about. Summerduldrums, right, sell them a go away. That's definitely been the case for Crypto. They launched into a very quiet, sideways shop b market. There's just not a lot of interest in them. But there's a lot of other things that go on here.

Like Bitcoin is kind of like if you're an advisor, like bitcoin, digital store value, those things they just like they make sense. They're very easy to sell, and if you want to diversify it with like we call it hot sauce in your portfolio, if you're already putting like two percent of your client's money into bitcoin, do you need to diversify it with another digital asset. Maybe not. So it's basically bitcoin first and then these other things

kind of need to fill out their own narrative. I've seen like these issuers and these trad five people that are trying to sell these ethereym metfs and ethereum in general are working on different things. But like so I could say Matt Hogan for bitwise for example, likes to say, like ethereum, you should be owning it and viewing it as like part of your tech exposure, like it almost should be part of the queues in a way. That

that's the argument that they're pushing. I just think there's no one cohesive argument, so it's a little bit harder. And honestly, ethereum is a lot more complex than bitcoin, right, There's a lot more things you can do, so it's a little more complicated. So for all those reasons, I mean Bitcoin ETF's really done really well, maybe one sideways the last couple of months, but still holding up well. Everything is there's been no issues Ethereum. Honestly, still no

issues over there. You look at everything besides ETH, they've taken in well over two billion dollars, so you know we're looking at outflows, yes, but that's because two point six billion came out of grey scales ETH, but two point one roughly came in to the other products. So they are doing well. They are pulling in money, it's just not enough to offset the ETH outflows.

then you're throwing another one at them right away. So I think that all of that contributed to the lower demand we're seeing. That said, I also always expected that the etherey metfs were going to be a bit of a slower burn, if you will. Like I thought the type of level of demand that we could see maybe twenty five percent of the Bitcoin ETF flows, I thought

it might take a while to get there. And I thought the theory metfs could potentially get up to like their market cap rat show, which is like, I don't know, thirty a third something like that over the longer term. But I think it's going to be a slower burn for all those things we just talked about. I'm kind of second guessing as so right now, I actually I've met with Steve mcclerk, who used to be one of

the guys running the Valkyrie ETFs. He has the under on fifteen percent of the flows in six months versus Bitcoin for ethereum, and I have the over and right now I am I'm going to owe him some food at Pubkey in New York City a few months from now.

Were both bigcoining ether coome Q four into twenty twenty five.

be beneficial to this market. There's no guarantee that that's going to be the case, but theoretically that's what should happen. But also we don't know exactly where somebody like Harris is going to stand, if they're going to follow like the typical way that Biden has handled things. I tend to think not. I think it will be neutral at worst, like maybe slightly positive at best if the demsill win in November, and I think it could be a very positive catalyst if somebody like Trump wins.

get approved. So that's one division of the SEC. But typically before they would approve those to Corporate Finance, you also have to get these those nineteen befores which we've talked about a lot, right and CBOE filed nineteen before on behalf of ARC or sorry not on behalf of PARC, half of twenty one Chaares and on behalf of van K. Those filings went through, but they have since withdrawn them. Essentially either the SEC refused to acknowledge them told them

to withdraw. Basically said this isn't happening, which isn't all that surprising. I mean, if you look at some of little lawsuits out there against Coinbase, Bracken, you name it, they basically flat out calls all hot A security and say they're not going to mess with that thing. So what we've seen is CBE has withdrawn. So for now it's dead in the order. Until we see another ninety before filing, nothing can happen. That said, twenty one chairs and van X still have those s ones out there,

so they're still filed. They're still technically active. They just need to go through that nineteen before process before they can get approved by the corporate finance. So are they dead kind of? I think again this goes back to

what I was just saying with the political process. I think if we see Trump in office, it's possible that actually I would say it's it's highly likely we would see another filing because the people would hope that somebody else would be running the SEC, so there could be a chain and the way the ADMIN is handling this stuff. So I think that could come down to the presidential election. But also you kind of need a bunch of other things, right, like right now you have the CFTC and the SEC

arguing over jurisdiction. You have the SEC calling this thing these things salon as specifically a security, CFTC is saying it's not. And then so like you don't know who has control over what. You don't know what exactly is a security or what is a commodity. So you kind of need that cleared up. Whether that's in the case of kind of similar to like what Ripple has gone through, you've got like some at least a little bit of

like binding clarity from the courts. You might need something like that, or more likely, I think what you need is a literal like Act of Congress to kind of clear all this stuff up for some things other than

bitcoin and ethereum to get through. I mean, the way right now it's set up is you need a futures market that's regulated and surveilled and the CFTC feels comfortable with it, and the SEC will allow it, and you can kind of use that to get a spot etf That's what we had with bitcoin, that's what we have with ethereum. We don't have any other markets for any other digital assets that could go through that same process, right so you kind of need some other thing out

there to happen for these things to get approved. That said, there is nothing like in the SEC regulation that says like you need a futures market that is surveiled for all these things. That's just kind of the process that this SEC has followed and what they wanted. It's not like that's hard coded into any law or language or anything. That's why I said, if we get a change in the admin at the SEC, then that could also change.

But there's a few other you need catalysts one of those three or four things I just mentioned to happen before you can get something like a Salona or possibly even a ripple ETF.

we were talking about earlier. Would it be too saturated for the masses, right, They get confused, Why do I need to invest in Solana? Isn't the ethereum the same thing? Let me just handle big, Let me just have some bigcoin, right.

those ETFs, so they're they're big business. I think a lot of that has to do with money came in when when Solana was like in single digit prices, so there was a lot of money that was in there, and then so you don't need that much to be in there, a few million dollars for it to get to the level it has when the price has gone up like I don't know, twenty x or whatever it is. So I think that also played a role. But it's still there's there's a lot of dctfs elsewhere, just not

here in the States, so there will be demand. But like you said, I just think right now, as things certainly look, it's kind of bitcoin first, and then everything else will be slower burn or just maybe not garner as much interest from the trad FI world, at least in the near term.

that's been going on for over a decade. And now we've seen a lot more consolidation where like these bigger etf issuers in the US are buying smaller shops elsewhere where in the world, whether they're European specialists or even in Asia. So in the case of there's actually some some asset managers in Asia that have bought big US issuers to kind of drum up the interest there. So that's been just an overwhelming trend that we've seen over the last few years, and it's picking up and I

think it's a good thing. It's basically bit wise sees them they bought etc Group. They have a bunch of ETFs in Europe, particularly particularly holding crypto asseids, so there's probably a lot of overlap they can do there. I mean, for example, they own now a Salona ETF in Europe, so twenty one shares. Who's another issuer the one that we just talked about who also filed with van K, They have some some ETFs. They they have the largest

salon of ETF in Europe. And you have van K also who has etns or etcs wherever you want to call them in Europe that hold these things. So there's plenty of experience over there already with dealing with these types of products. And then OBTC is unique. I think. So obtc's structure was similar to those gray scale trusts where they were kind of closed ended. You can come in, but you couldn't really leave unless but you had you

could sell your shares, you can redeem them. So theoretically, if it was trading at a massive discount, you just had to sell at a discount if you wanted to sell, and these things were trading a bit of a discount. A lot of people thought that Osprey was going to go through the same process that Gray Skill did and you know, convert this thing to an outright ETF But I think this was probably the best case scenario for

everyone involved. I mean, doing that is very expensive. They only had one hundred and thirty million dollars in assets, I think, so it's not like it was a huge cash cow. And this way, those those holders of OBTC are basically just going to get bit wise as bit B shares in return of equivalent value. So all of a sudden you get out, you're no longer a discount, and you still have this coached pitcoin. It's a non

taxable event. So and then also Osprey doesn't have to spend a bunch of time, effort, energy, money, you name it, going through and converting this thing into an extremely competitive market where fees are twenty BIPs and lower. And there's already you know, wealked about this ten to eleven products that hold spot bitcoin, like Osprey just launching and converting OPDC, it'd be hard to like compete there, So I think just makes sense for everyone. And like you said, bit

wise is growing its asset base. It now holds it now owns that one hundred and thirty million. I don't know what they paid for it, but they have those assets now inside or they will have those assets in BitB.

It extends their lead over the mini trust. So we didn't really talk about this too much, but Grey scales unique process of spinning out and mini trust at a much lower fee. Now that product ticker BTC has nineteen or one point nine billion in assets. So, I mean the other thing we I should mention here is like everyone talks about these things, they're looking at it, but

like all of these ETFs are extremely successful. I mean most ETF fishers, they get one product that could have over one hundred million dollars in assets, they view it as an extreme success. And all of these guys have gotten there within eight months, not even so it's been an absolute smashing success. But now, I mean, also, it's only one hundred and thirty mil, so I mean, obviously that's a lot of money, but it's not a huge deal in the type of numbers that we're talking about,

but it will be beneficial. It'll probably get them much closer on the once it's fully complete too. ARCB ticker RB.

gonna happen, but I would never say never. But also, isn't that surprising considering like I feel like every other month I hear about the Lazarus Group or or North Korea hackers like getting on board on some like project and then siphoning away assets and things like that. So it's not surprising at all that they would target like what is I don't know, it's the biggest honeypot of bitcoin in the world. If you're gonna, if you're gonna go look at how much how much bitcoin the coin

base holds. I don't know what the exact number is, but it's it's it's it's an absolutely stupid number. M M.

in Canada and elsewhere. Vanak uses them as a custodian on their etf hold Will and then obviously bicco Is is trying to get into space as well. So I think we'll see more of these issuers, you know, split up who they use. I mean, Fidelity uses their own custodial service, so I assume they're just going to stick with their own custodial service. I think black Rock is likely just going to stick with their partner and coinbase,

and they have some that their partnership going on. But I think some of these other issuers, I think I would not be surprised at all to see them, you know, diversify and use some of these other you know, the current ones, the biccos of the world or like you said, b and Y, Melon State treet gets into space, any of these other are like traditional qualified custodians. If they enter the space, I think we'll see it, We'll see it happen.