Which Tokens Could Launch ETFs After ETH? SOL Has the Highest Probability, DOGE is More Likely
In the early hours of May 24th, the Ethereum ETF reached a milestone moment in the United States as the Securities and Exchange Commission (SEC) approved the issuer’s 19b-4 filing. As a result, discussions have begun regarding the possibility of other tokens launching ETFs. What challenges will approval for ETFs of other tokens face? And if it is possible, which tokens are most likely to be approved first? SOL, PEPE, or DOGE?
From the perspective of industry experts, consensus on the token and whether it is defined as a security are two key hurdles. Currently, if there are no major changes to the regulatory framework in the United States, the next ETF may not emerge until two to three years from now.
SOL has high expectations but low probability
On May 23rd, Brian Kelly, the CEO of BKCM, predicted on CNBC’s “Fast Money” program that Solana (SOL) could be the next cryptocurrency to launch an exchange-traded fund (ETF) in the United States. However, this bold prediction immediately faced opposition from industry experts who pointed out several significant regulatory and market challenges.
Firstly, the SEC has classified Solana as a security, which was mentioned in lawsuits against major exchanges such as Coinbase and Kraken. This makes the path to approval for Solana more complicated. Additionally, unlike Bitcoin and Ethereum, which have futures ETFs, Solana lacks this critical 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 robust cryptocurrency regulatory framework established by the US Congress.
Currently, Bitcoin and Ethereum are the only two cryptocurrencies approved for futures ETFs in the United States. Major ETF issuers also show 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, stating that there may not be a spot Solana ETF without a futures market and clearer rules. He believes that before there is any chance of approval for this product, Congress needs to establish a legitimate regulatory framework for cryptocurrencies.
Adam Cochran, a partner at Cinneamhain Ventures, believes that due to simpler regulatory conditions, Litecoin (LTC) or Dogecoin (DOGE) may be the next cryptocurrencies to receive ETF approval. Litecoin and Dogecoin both use a proof-of-work (PoW) 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 cryptocurrency ecosystem. Some believe that the moves of institutions like Grayscale could also provide clues for the next ETF, but the situation is currently unclear.
Consensus and being defined as a security are key hurdles
On May 23rd, during the “What Will Ethereum Spot ETF Bring?” Twitter Space event co-hosted by PANews and OKX, the attendees also discussed this issue. 0xVeryBigOrange, the host of Zero×Knowledge Emporium, believes that when analyzing this issue, it is essential to start with the top 10 or even the top 5 tokens by market capitalization. Apart from Bitcoin and Ethereum, SOL is almost impossible due to several ongoing legal disputes. Binance Coin (BNB) is also unlikely, while DOGE may have a slightly higher probability.
“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 represents a qualitative leap. For others, you can use the process of elimination, and it is unnecessary to consider tokens with small market capitalizations,” added 0xVeryBigOrange.
0xAA_Science, an Ethereum ecosystem developer, shares the same viewpoint as 0xVeryBigOrange. “After Ethereum, I also think that by market capitalization, we should give meme coins more opportunities, as meme coins distributed fairly may be the least like securities. However, I don’t think the US will accept mass investment in meme coins in the short term, so let’s take it slow.”
Mindao Yang, the founder of dForce, believes that several indicators mentioned earlier are relevant. One of them is the concentration of chips. Based on this perspective, SOL is indeed impossible within the top 20. I think it is also related to stickiness. For example, Bitcoin and Ethereum have been in the market for over 10 years, and the chips are already very dispersed. Solana, on the other hand, only has about four to five years. Additionally, it was mentioned earlier that there is a concentration of foundations, including FTX, which previously held a 10% stake. When you add up all the relevant individuals, it’s unlikely that Solana will meet the requirements.
Another prerequisite for the approval of Bitcoin and Ethereum ETFs is trading on the Chicago Mercantile Exchange (CME) in the United States. Since the ETF itself needs to reference prices, there are no other assets traded on the CME except for Bitcoin and Ethereum. There may be a gap of at least two to three years without a third ETF emerging. If there is a third one, it could possibly be Dogecoin, but the market value of Dogecoin is too low, and creating an ETF for a market cap of just over $20 billion seems somewhat lackluster.
Currently, Bitcoin and Ethereum hold a very strong position 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 others for that matter? There may not be much narrative differentiation, so for at least the next two to three years, BTC and ETH are likely to be the only investable ETFs, and it is indeed difficult to see others.
Data analyst Phyrex believes that it is highly possible on an annual basis. The second issue is DOGE, which depends on the conditions for SEC approval of spot ETFs. The first condition is that it must not be a security. “Let’s say DOGE is not a security, which is likely.”
The second condition is having sufficient consensus, which refers to market value and funds. Additionally, when the SEC rejects an ETF, it includes market manipulation, and DOGE has obvious market manipulation. Whenever Elon Musk mentions anything related to DOGE, it always causes a market reaction. The price of DOGE may increase significantly. Therefore, from this perspective, it belongs to highly concentrated and manipulated markets.
So, regardless of who becomes the chairman of the SEC or whether FIT21 has been passed, the possibility of DOGE’s spot ETF approval is very low. This is because of its highly manipulated market and market capitalization.
In terms of market value, whether it is DOGE or others, the gap is significant. As we all know, SOL is impossible. Even if it achieves consensus, its main problem is the SEC. The SEC has already targeted Solana in the Coinbase lawsuit, so a legal battle between Solana and the SEC is inevitable. It’s just a matter of when.
Even if Gary Gensler (SEC chairman) changes the situation, the relationship between Solana and Coinbase will still face legal issues. BNB is unlikely. Ripple (XRP) is possible, but Ripple has not won any SEC lawsuits. Ripple has only gone from losing 100 points to losing 80 points.
Looking at the overall cryptocurrency market, if it meets the condition of being a security, it may not have enough consensus. If it meets the condition of having consensus, it may not be considered a security. According to the SEC, besides 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 first be listed on the CME. If this step is not seen, it may be more difficult.
Furthermore, even if there are new ETFs in the future, it may only be possible after FIT21 is passed and the definition of the entire cryptocurrency industry changes. If this definition remains unchanged, it is highly likely that it will be based on an annual timeline, and it is not ruled out that none of the existing tokens will meet the requirements.
This article is a collaboration and was originally published on PANews.