Broadening appeal
The Solana cryptocurrency protocol is starting to rise like the phoenix many forecast it to be.
By Solana Labs CEO Anatoly Yakovenko’s own admission, its success can be put down to a sudden groundswell of support for crypto where previously there was little among investors.
The growing interest of traditional financial institutions has proved especially telling.
Solana, the sixth-biggest cryptocurrency in the world by market cap, is certainly not complaining.
Now boasting annual revenue in the US$3 billion bracket, it has also hit the mark with the Solana coin’s first exchange-traded fund (ETF).
Blockchain-based ETFs invest in crypto investment products as well as companies that develop and deploy blockchain technology.
The launch of the Bitwise Solana Staking ETF is significant because for the first time investors traditionally drawn to brokerage and retirement accounts have been exposed to Solana.
Why Solana is one to watch
There are two reasons why this bodes well for future performance and the overall Solana price.
The first is greater exposure to the crypto’s coin, an area where Solana has struggled compared to market rivals.
The second is the ability to generate a yield through staking.
Staking is a process where crypto already owned by an investor can be secured to earn rewards.
The protocol used for this purpose is called Proof of Stake (PoS).
Bitwise Asset Management, which issued the Bitwise Solana Staking ETF, is confident that investors can pull in a 7% annual yield through staking via the offering.
This is a tempting proposition for people who have been reluctant to explore crypto before.
Spot and futures variants
There are two types of Solana ETF.
The Spot Solana ETF holds coins directly.
Here, the value of the fund’s underlying holdings align with its net asset value.
The second variant is the Futures Solana ETF.
As the name suggests, the futures market determines how well or not the fund performs.
However, as with all futures-related assets, the second option carries greater risk.
Big benefits
Although the bitcoin and Ethereum ETFs currently dominate this space, the Bitwise Solana Staking ETF has several factors in its favour.
For one, they are accessible to more investors since they are traded on traditional stock exchanges.
For other, because of the fact they are traded on traditional exchanges, shares can be bought and sold seamlessly.
The benefit of this is liquidity – hereto a problem with owning crypto directly.
The third factor is perhaps the most advantageous of all: regulation via reputed oversight bodies.
When an entity like America’s Securities and Exchange Commission gets behind an asset, logic dictates that investor confidence rises.
Solana moving on up
The arrival of the Bitwise Solana Staking ETF may prove to be the breakthrough Solana has been looking for.
It is worth bearing in mind that it outperformed even crypto giant bitcoin in its debut week.
To say that it is now on the radar of large-scale investors is something of an understatement.
Put another way, Solana is now well and truly playing with the big boys thanks to this offering.