Prediction: Solana will be the first cryptocurrency to get a spot ETF in 2025.

Following the stain Bitcoin and Ethereum ETF approvals, there has been much speculation as to which crypto could be next. Several names have already been suggested, including all the usual suspects: XRP, Solana (SOL 0.24%), Cardano, Litecoinand avalanche.

Of these, Solana has the best chance of getting a spot ETF. In fact, this could happen as early as January 2025. From my perspective, there are two key factors that make this likely to happen.

Search the market

In terms of market capitalization, Solana ranks fifth among all major cryptocurrencies. This is a huge determinant because market capitalization can be useful as a proxy for investor demand. As a general rule, Wall Street won’t launch a product if there isn’t enough demand for it, so it’s worth looking at how much demand there is from both retail and institutional investors.

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In late June, crypto investment firm GSR crunched the numbers and concluded that Solana trailed only Bitcoin and Ethereum in terms of total demand. The firm’s “demand analysis” considered three key factors: (1) market capitalization and total trading volume, (2) assets under management of investment products already on the market, and (3) size, activity and scope of an online community for a specific token. In all these metrics, Solana outperformed its competitors XRP, Cardano and Avalanche.

There is also great data available from CoinShares, which tracks the flow of institutional investors into and out of major cryptocurrencies. According to its latest report from early August, Solana still has a clear lead over major rivals like XRP, Cardano and Litecoin in terms of year-to-date inflows. That being said, the influx of investors in both Bitcoin and Ethereum dwarfs anything going on with Solana right now.

A regulatory perspective

Of course, there’s no way the Solana ETF would be approved if regulators had any doubts about whether Solana might actually be a security. It was the one factor that hung over Solana for most of the past year. But in late July, the SEC appeared to back away from its previous position when it admitted it would no longer consider Solana as a potential security. If you’re hoping for the Solana ETF, that’s exactly what you want to see happen.

It’s also important to keep an eye on what’s happening in other financial markets outside of the US. For example, in August, Brazilian regulators approved the spot Solana ETF. If this performs well in Brazil, then it could make it much easier to get a US version of the ETF approved. And indeed investment firm VanEck — one of only two firms to have already filed a spot Solana ETF with the SEC — now says the Solana ETF is “imminent.” I wouldn’t go that far, but it’s looking good for Solana right now.

What to look for in 2024

As we saw from the recent mini market crash in early August, there is still a lot of volatility in the crypto market. Any sustained selloff over the next few months will likely delay the launch date of the Solana ETF simply because of the lack of investor demand for the product. Additionally, the SEC is unlikely to sign off on much of anything if the crypto market shows signs of weakness or if demand dries up for existing crypto ETFs.

So keep an eye on the overall state of the crypto market as well as the influx of Bitcoin and Ethereum ETF investors. If the trend is positive, then I’m much more bullish on the launch of the Solana ETF in early 2025. And if pro-crypto sentiment persists past the 2024 presidential election, then I’d be even more bullish.

That being said, Solana is a high risk crypto investment with high upside potential. So if you’re considering investing in Solana, be sure to do your due diligence. Investing in the Solana ETF would help mitigate some of this risk, but cannot completely eliminate the risk of holding Solana.