grayscale

Viewpoint: After the launch of the SOL ETF, it is unlikely to see a sell-off, while the LTC ETF is the opposite

ChainCatcher news, according to The Block, the digital asset brokerage and research firm K33 stated that as the U.S. Securities and Exchange Commission (SEC) becomes more favorable towards cryptocurrencies, it may approve the launch of new spot altcoin ETFs in the coming months, providing investors with some compelling long-short strategy opportunities.Currently, eight institutions have submitted applications for a spot Solana (SOL) ETF, and the SEC has proactively contacted asset management companies, requesting them to include staking provisions in their updated application documents. K33 analyst Lunde pointed out that this indicates an increased level of engagement from regulators and raises the likelihood that Ethereum and Solana ETFs may include staking features. Additionally, there are ETF applications for other crypto assets such as LTC, XRP, and DOGE, besides Solana.Lunde mentioned that when Bitcoin and Ethereum ETFs were launched, a so-called "Grayscale effect" occurred—where Grayscale's trust funds, after converting to ETFs, saw a massive influx of holdings into the market, leading to over 50% of assets under management being sold off within 200 days. However, the situation for potential new ETF assets differs from Grayscale's case. Unlike XRP and Dogecoin, Grayscale's Solana and Litecoin trusts have been trading on the public market, thus serving as a more direct reference.Lunde stated that Grayscale's Solana trust launched in 2023 has never traded at a discount and only holds 0.1% of the total SOL supply, resulting in a lower risk of market sell-off. In contrast, Grayscale's Litecoin trust frequently trades at a discount, holding 2.65% of the total LTC supply, and is facing discount pressure again after recent physical purchases. Furthermore, currently, only two institutions, Canary Capital and CoinShares, have applied for a Litecoin ETF, which means market liquidity may be low, making it difficult to absorb potential sell-off pressure.Lunde believes that the structure of the Solana ETF is clearer, while the Litecoin product may face capital outflows similar to what happened after the conversion of GBTC and ETHE. Therefore, after the ETF launches, a trading strategy that goes long on SOL while shorting LTC may be attractive, especially if both are listed simultaneously.
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