Which tokens are likely to launch an ETF after ETH? SOL has the highest likelihood, while DOGE has a greater probability.
In the early hours of May 24th, the Ethereum ETF reached a milestone moment in the US, as the Securities and Exchange Commission (SEC) approved the issuer’s 19b-4 filing. This has sparked discussions about the possibility of other tokens launching ETFs. What challenges will approving ETFs for other tokens face? And if it is possible, which tokens are more likely to be at the forefront? SOL, PEPE, or DOGE?
From the perspective of industry experts, the consensus of the token and whether it is defined as a security are two crucial factors. Currently, if there are no significant changes to the regulatory framework in the US, the next ETF may not be produced for another two to three years.
SOL has a high likelihood but a lower possibility
On May 23rd, Brian Kelly, the CEO of BKCM, predicted on CNBC’s “Fast Money” program that Solana (SOL) could become the next cryptocurrency to launch an ETF in the US. However, this bold prediction was immediately met with opposition from industry experts who pointed out several significant regulatory and market challenges.
Firstly, the SEC has classified Solana as a security, which has been mentioned in lawsuits against major exchanges like Coinbase and Kraken. This makes the path to approval for Solana more complicated. Additionally, unlike Bitcoin and Ethereum, which have futures ETFs, Solana does not have a crucial market foundation.
James Seyffart, an ETF analyst at Bloomberg, stated that before any spot ETF is launched, Solana needs futures products listed on the Chicago Mercantile Exchange or a strong cryptocurrency regulatory framework established by the US Congress.
Currently, Bitcoin and Ethereum are the only two cryptocurrencies approved for futures ETFs in the US. Major ETF issuers also have little interest in launching ETFs for other altcoins, including Solana. BlackRock, a well-known ETF issuer, stated that they have no plans to launch ETFs for other altcoins, including Solana.
Nate Geraci, the president of ETF Store, agrees with Seyffart’s viewpoint and believes that without a futures market and clearer rules, a spot Solana ETF may not be possible. He stated that before there is any chance of approval for such a product, Congress needs to establish a legal regulatory framework for cryptocurrencies.
Adam Cochran, a partner at Cinneamhain Ventures, believes that due to simpler regulatory conditions, Litecoin (LTC) or Dogecoin (DOGE) may have a chance of being the next cryptocurrencies to receive ETF approval. Litecoin and Dogecoin both use a proof-of-work consensus mechanism similar to Bitcoin, which may make their regulatory paths less controversial.
On May 23rd, Grayscale launched two new investment trust funds, Grayscale Near Trust (NEAR) and Grayscale Stacks Trust (STX). Rayhaneh Sharif-Askary, the Chief Product and Research Officer at Grayscale, stated that they are committed to launching new products that allow investors to access emerging and developing parts of the crypto ecosystem. Some believe that the actions of institutions like Grayscale may also provide clues for the next ETF, but the situation is currently unclear.
Consensus and whether it is defined as a security are the key factors
On May 23rd, during the “What will Ethereum spot ETF bring?” Twitter Space event co-hosted by PANews and OKX, the attending guests also discussed this issue. The host of Zero × Qianguo’s Dry Goods Store, known as Big Orange (@0xVeryBigOrange), believed that the analysis should start with the top 10 or even the top 5 in terms of market capitalization. He stated that it is almost impossible for SOL, as there are many ongoing disputes and lawsuits surrounding it. BNB is also unlikely, while DOGE may have a slightly higher chance.
“I have been paying attention to DOGE recently, but I still think the probability of other tokens launching ETFs immediately is extremely low, and launching or not launching is a qualitative leap. In other cases, you can use the process of elimination, and smaller market capitalizations can be excluded.” Big Orange added.
0xAA, an Ethereum ecosystem developer, shares the same viewpoint as Big Orange. “After Ethereum, I also think that based on market capitalization, it would be good to give meme coins more opportunities because meme coins distributed fairly may be the least like securities. However, I don’t think the US will accept the mass investment in meme coins in the short term, so let’s take it slow.”
Mindao Yang, the founder of dForce, stated that several indicators mentioned earlier include the concentration of chips. Looking at it from this perspective, it is clear that Solana is impossible. It has only been around for four to five years, while Bitcoin and Ethereum have been in the market for over ten years, resulting in highly dispersed chips. Additionally, there is the concentration of the foundation, including FTX’s previous ownership of a 10% stake. When combined, these parties may account for more than 20% of Solana, making it practically impossible.
Another prerequisite for the approval of Bitcoin and Ethereum ETFs is trading on the Chicago Mercantile Exchange (CME) in the US. Since the ETF itself needs to reference prices, there are no other underlying assets traded on it besides Ethereum and Bitcoin. There may be a window period of at least two to three years with no new ETFs. If there is a third one, Dogecoin is a possible candidate, but its market capitalization is too low, and creating an ETF for a market cap of just over $20 billion may not be attractive.
Currently, Bitcoin and Ethereum hold a strong advantage in the ETF market because their narratives are completely different. The narrative of Ethereum highly overlaps with Solana. So, with Ethereum available, why choose Solana or any other tokens? There may not be much narrative differentiation, so for the next two to three years, BTC and ETH may be the only eligible investments for an ETF, and there don’t seem to be any alternatives.
Phyrex, a data analyst, believes that on an annual basis, it is highly likely. As for DOGE, it depends on the conditions set by the SEC for approving spot ETFs. The first condition is that it must be a non-security. “Let’s assume that DOGE is a non-security, which is possible.”
The second condition is having sufficient consensus. Consensus refers to the market value of funds, and there is also the issue of market manipulation. DOGE clearly demonstrates significant market manipulation, especially when Elon Musk makes any DOGE-related announcements, it always causes a market reaction. The price of DOGE may experience larger fluctuations. From this perspective, DOGE falls into the category of highly concentrated and manipulated markets.
Therefore, regardless of who becomes the chairman of the SEC or whether the FIT21 proposal is approved, the possibility of DOGE launching a spot ETF is very low. This is due to its highly concentrated market and market manipulation.
Looking at market capitalization, it is clear that DOGE or any other token has a significant gap. It is widely known that SOL is not possible, even if it meets the consensus requirement. Its main problem lies with the SEC, which needs to save face. Currently, the SEC has already identified Solana as a security in the Coinbase lawsuit, so a legal battle between Solana and the SEC is inevitable. The timing is the only question.
Even if Gary Gensler (SEC Chairman) is replaced, the legal battle between Solana, Coinbase, and the SEC will continue. BNB has a low possibility. Ripple (XRP) is possible, but Ripple has not won any SEC lawsuits. It has only gone from losing 100 points to losing 80 points.
From an overall perspective, if a token satisfies the security requirement, it may not have enough consensus. Conversely, if it satisfies the consensus requirement, it may not meet the security requirement. According to the SEC, except for BTC, ETH, BCH, LTC, DOGE, and STX, no other token has a clear statement that it is not a security.
As Mindao mentioned, it must be listed on the CME first. If this step is not seen, it may be more difficult.
In the future, even if there are new ETFs, it may only be possible after the FIT21 proposal is approved and the definition of the entire cryptocurrency industry is changed. If this definition remains unchanged, it is highly likely that the goal will be on an annual basis, and it may even exclude all existing tokens from meeting the requirements.
