In an alarming turn of events for Solana (SOL), the cryptocurrency witnessed an unprecedented surge in outflows last week, amounting to a staggering $39 million. This represents the highest outflow on record for SOL investment products, raising concerns within the crypto community. The significant outflows come amid broader market movements, influenced by recent macroeconomic data, and have further complicated the regulatory landscape surrounding the approval of Solana ETFs.
A Closer Look at the Outflows
The massive outflows from Solana have been attributed to a sharp decline in the trading volumes of meme coins, a segment on which Solana heavily relies. CoinShares reported that these outflows are the highest in Solana’s history, signaling waning investor confidence in the cryptocurrency. This development stands in stark contrast to the modest inflows experienced by other digital assets, which totaled $30 million last week.
Bitcoin (BTC) was the most significant beneficiary during this period, attracting $42 million in inflows, indicating continued investor confidence in Bitcoin and its spot ETFs. On the other hand, short-Bitcoin ETPs saw outflows for the second consecutive week, suggesting a reduced appetite for betting against BTC’s performance. Ethereum (ETH), despite the turbulence in Solana, recorded $4.2 million in inflows. However, this figure masks a more complex picture, as new entrants into the Ethereum ETF space saw substantial inflows of $104 million, while Grayscale’s ETH products experienced significant outflows totaling $118 million.
Regulatory Uncertainties Loom
As Solana grapples with record outflows, the uncertainty surrounding the approval of Solana ETFs has further dampened sentiment. Recently, ETF filings by VanEck and 21Shares for spot Solana ETFs were removed from the Chicago Board Options Exchange (Cboe) website, sparking concerns about the regulatory approval process. This move has fueled speculation about the U.S. Securities and Exchange Commission’s (SEC) stance on these investment products.
Both VanEck and 21Shares had filed S-1 forms for spot Solana ETFs in late June, following the SEC’s increased clarity on the approval of nine spot Ethereum ETFs. However, the absence of a notice of filing from the SEC for these Solana ETFs has led to debates about whether the 19b-4 filings were withdrawn or rejected. The 19b-4 submission is a crucial step in the ETF approval process, informing the SEC of a proposed rule change by a self-regulatory organization, such as an exchange.
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Scott Johnsson, General Counsel at Van Buren Capital, commented on the situation, suggesting that SEC Chair Gary Gensler might have notified Cboe that the SOL applications were improperly filed as Commodity-Based Trust Shares. This, according to Johnsson, would eliminate the need for the SEC to issue a formal disapproval order. Similarly, Nate Geraci, President of ETF Store, confirmed the removal of the ETF filings and expressed skepticism about the approval of Solana ETFs under the current regulatory environment.
The latest Solana outflows have heightened uncertainty, with interest in SOL investment products dwindling. Industry experts have criticized U.S. regulators for lagging behind other countries, such as Brazil, which have already approved spot Solana ETFs. Matthew Sigel, VanEck’s Head of Digital Assets Research, suggested that the U.S. needs a regulatory “soft fork” to facilitate the approval of Solana ETFs. As the crypto market continues to navigate these turbulent waters, the future of Solana ETFs remains uncertain, with regulatory hurdles posing significant challenges.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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