Why is the Solana market strong? Strong fundamentals and ETF expectations attract capital inflow

Author: Nancy, PANews

After the expectations for Bitcoin and Ethereum spot ETFs have settled, Solana has become the next target for capital favor and speculation, especially with multiple issuers applying for Solana ETFs, which has increased market confidence. The strong fundamentals, significant institutional accumulation, and the upcoming U.S. elections have further boosted the market's optimistic sentiment towards Solana. This article will analyze the main reasons for Solana's recent performance exceeding the market.

Multiple Metrics Outperform Ethereum, Attracting Institutional Accumulation

Recently, Solana's market performance has been strong, gaining more favor from institutions.

Price information often has a significant impact on user confidence and market expectations. According to CoinGecko data, the SOL price recently reached a nearly three-month high, and over the past 30 days, it has increased by approximately 31.1%, outperforming Bitcoin and Ethereum among various crypto assets.

At the same time, Artemis data shows that in the past month, Solana's daily trading volume increased by 40.5% to $43.7 million; the number of daily active addresses rose by 75% to 2.1 million, mainly from wallets, MEME, and cross-chain bridge sectors, with a higher proportion of new user addresses; TVL rose to $5.2 billion, an increase of about 26.9%; daily transaction fees grew over 33.3% to $2 million, and daily revenue also increased by over 33.1%, with wallets, DeFi, and MEV being the main contributing sectors.

Additionally, Blockworks Research analyst Ryan Connor recently stated on the X platform that Solana's decentralized exchange (DEX) trading volume has surpassed Ethereum for the first time in the past 30 days, making it the most used chain by this measure.

According to a report by Coin98 Analytics, Solana's fees and revenue saw significant growth in the second quarter of this year, generating over $26 million in revenue, a year-on-year increase of more than 42 times; the total trading volume of SOL reached $292 billion, nearly a 7-fold increase compared to the same period last year. Dne data also shows that Solana's liquid staking rate rose to 6.58%, with a quarter-on-quarter growth of 1.76%, and the dominance of the top three providers decreased from 93% to 68.7%, indicating a healthier and more diversified market.

With strong fundamentals, many institutions have recently begun to publicly increase their holdings in Solana. For example, Canadian fintech company DeFi Technologies announced that it has added Solana to its digital asset reserves, holding 12,775 SOL (approximately $2.03 million); Canadian listed investment company Cypherpunk has significantly increased its SOL holdings to over 63,000 and announced plans to run its own Solana validator, staking 49,917 tokens (worth about $11 million) using its own Solana node.

"This is not something you see every day. We are currently responding to the growing interest from investors in Solana—one of the most actively traded cryptocurrencies after Bitcoin and Ethereum," commented the global head of ETP listings at Cboe on the Solana ETF 19b-4 application. Stratos founding partner Rennick Palley also stated, "The easing of U.S. regulatory policies is increasing SOL's appeal among professional investors."

Multiple Issuers Submit Solana ETF Applications, Political Winds Bring Uncertainty

Under Solana's impressive market performance, the Solana spot ETF application is considered one of the important catalysts and is among the most anticipated and likely ETF varieties.

On June 27, VanEck announced that it had submitted an application for the Solana trust "VanEck Solana Trust" to the U.S. SEC, making it the first Solana ETF application in the U.S. If approved, this ETF will be listed on the Cboe BZX exchange. 21Shares quickly followed suit, submitting an S-1 filing for a Solana spot ETF to the SEC, planning to trade the 21Shares Core Solana ETF on the Cboe BZX Exchange. Digital asset management company 3iQ also recently launched an application for a Solana ETF in Canada, planning to list under the code $QSOL, making it the first Solana ETF application in North America.

At the same time, Franklin Templeton recently expressed optimism about Solana, stating, "Beyond Bitcoin and Ethereum, we believe there are other exciting developments that will drive the growth of the crypto space. Solana has shown broad applications and is maturing, overcoming the growing pains of technology and highlighting the potential of high-throughput single-chip architecture." Nate Geraci, president of The ETF Store, also revealed that in the coming months, a certain ETF issuer will apply to launch a combination spot ETF for Bitcoin, Ethereum, and SOL.

VanEck, 21Shares, and Franklin Templeton are all issuers of Bitcoin and Ethereum spot ETFs in the U.S., and their involvement and statements undoubtedly increase external expectations for Solana's spot ETF. Currently, Cboe has submitted the 19b-4 forms for VanEck and 21Shares' Solana ETFs to the U.S. SEC. "Once the SEC confirms these documents, the decision clock starts ticking," Nate Geraci commented.

With market sentiment ignited, the political landscape changes during the U.S. elections further elevate the likelihood of Solana's spot ETF approval. In fact, as the probability of Republican candidate Trump's campaign rises, the likelihood of SEC Chairman Gary Gensler, a radical regulator, being "ousted" has surged. 10x Research founder Markus Thielen even predicts that although Gensler's term will end on June 5, 2026, he is likely to resign in January or February 2025, when President Biden's term ends. Previously, the SEC had classified SOL as an unregistered security multiple times, making its approval path quite challenging.

"If SEC Chairman Gary Gensler is no longer in office after the 2024 presidential election, the likelihood of Solana ETF approval will increase," Matt Sigel stated, noting that crypto voters could play a key role in the election, and the regulatory environment in Washington is shifting towards supporting cryptocurrencies. The path from Bitcoin and Ethereum futures to spot funds has merely been Gensler's psychological tactics. Bloomberg ETF analyst James Seyffart also pointed out that the final deadline for the Solana ETF is mid-March 2025. However, the most important date during this period is November. There is only a chance to launch at some point in 2025 if there is a new management team in the White House and SEC.

However, the political influence on Solana remains unclear, as SBF, the founder of FTX closely associated with Solana, is one of President Biden's largest donors as a "money man" for the Democratic Party. It is worth noting that Solana founder Anatoly Yakovenko has not publicly disclosed his political stance.

From the capital inflow perspective of the approved Bitcoin spot ETF, if Solana officially joins this ETF craze, it will have a direct stimulating effect on its price. According to predictions from well-known crypto market maker GSR Markets, if the U.S. launches a Solana spot ETF, the capital inflow ratios in bear, baseline, and ideal scenarios would be 2%, 5%, and 14%, respectively, and if Solana's market cap averaged 4% of Bitcoin's market cap over the past year, then SOL could grow 1.4 times in a bear market, 3.4 times in a baseline scenario, and 8.9 times in an ideal scenario.