Wednesday’s launch of the US’s first Solana staking exchange-traded fund (ETF)
by Rex Shares and Osprey Funds is expected to serve as a “litmus test” for institutional appetite for alternative cryptocurrency ETFs and staking, according to Presto Research. The offering, set to list as the SOAN ETF, aims to provide investors with exposure to the Solana network while also offering yield opportunities through staking participation.

Peter Chung and Min Jung, writing in a research note Tuesday, identified the impending launch as a crucial indicator. They argue it will help determine if the relatively subdued performance of US Ethereum ETFs since their inception can be attributed to factors specific to the Ethereum blockchain itself or to broader institutional wariness towards altcoin investments.

“A strong market response to the Solana ETF would challenge this narrative, suggesting that Ethereum ETFs’ struggles stem from chain-specific issues rather than a fundamentally flawed investment thesis for altcoins broadly,” the researchers wrote.

The Potential Significance

Beyond exposure, the SOAN ETF offers a significant additional feature: the potential for passive income generated through staking SOL tokens. This yields angle holds particular weight given institutional investors’ historic aversion to assets lacking clear cash flows or returns.

Chung and Jung posited that a robust response from the market, including both trading volume and asset inflows, would underscore the importance of yield for attracting institutional capital. They suggested a first-month inflow target of $150 million would signal a “solid start” for the nascent category of staking ETFs.

Context: Altcoin ETFs and the Ethereum Question

The commentary highlights the anticipation surrounding a wave of pending altcoin ETF applications currently under review by the U.S. Securities and Exchange Commission (SEC). These applications encompass various cryptocurrencies including Solana, XRP, Litecoin, Dogecoin, and Pengu.

The performance disparity between Bitcoin and Ethereum ETFs underscores the potential hurdles these new entrants face. While Bitcoin ETFs established last year managed to amass $107 billion in assets under management within their first year, becoming the most successful ETF launch ever, Ethereum ETFs have gathered a stark $4 billion in inflows during their inaugural year.

SEC Scrutiny and Future Outlook

The outcome of the numerous pending spot altcoin ETF applications represents another major focal point. Analysts from Bloomberg ETFs anticipate “a wave of new ETFs” later this year, with a particular likelihood for approvals concerning Litecoin, Solana, and XRP specifically. The recent May SEC ruling validating staking ETFs has already provided a boost to this emerging product category.