Bybit's recent expansion to support Solana-based assets, including PayPal's PYUSD stablecoin, highlights the evolving landscape of digital finance as platforms and investors navigate the growing presence of decentralized finance (DeFi). However, despite the increased focus on Solana, industry experts like Katalin Tischhauser from Sygnum suggest that demand for Solana-based ETFs in the U.S. remains limited.
Solana ETFs: Limited Demand and Market Impact in the U.S. According to Sygnum’s Katalin Tischhauser
The launch of Solana exchange-traded funds (ETFs) in the United States has sparked discussions among investors and analysts about the potential demand for these financial products. However, Katalin Tischhauser, head of investment research at Sygnum, a prominent crypto bank, has expressed skepticism about the level of interest that Solana ETFs will generate among U.S. investors.
Tischhauser’s skepticism is rooted in the current performance of the Grayscale Solana Trust (GSOL), a private fund managed by Grayscale Investments, a leading digital asset manager. Despite the growing popularity of ETFs for other cryptocurrencies, such as Bitcoin and Ethereum, the GSOL has seen only “minuscule” inflows from investors. According to Tischhauser, this suggests weak demand for Solana-based investment vehicles among U.S. wealth managers.
As of August 2024, the GSOL’s assets under management (AUM) stood at less than $70 million. This is a stark contrast to the Grayscale Bitcoin Trust, which managed nearly $30 billion in AUM before its conversion to an ETF earlier this year. Tischhauser attributes this disparity to the “relative name recognition of Solana versus Bitcoin,” emphasizing that Bitcoin’s established reputation and widespread adoption have made it a more attractive investment option.
Interestingly, shares of GSOL are trading at a premium to their net asset value (NAV), with a markup exceeding 7x as of mid-August. The NAV is a key metric that reflects the underlying value of SOL per share in the fund. While this high premium indicates some level of demand, Tischhauser argues that it does not signal the kind of widespread interest that would significantly impact the market. “The high premium suggests some demand, but it’s not the kind of demand that will significantly impact the market,” she noted.
The lukewarm reception of Solana ETFs stands in stark contrast to the massive success of Bitcoin and Ethereum ETFs, which have dominated the market in 2024. According to data from Morningstar, Bitcoin and Ether ETFs have collectively amassed nearly $63 billion in AUM. This surge in investment is indicative of the strong institutional and retail interest in these two leading cryptocurrencies.
Dave LaValle, Grayscale’s global head of ETFs, highlighted the unprecedented demand for Bitcoin ETFs, stating, “Since launching in January, BTC ETFs have seen more than three times the largest one-year inflow of any ETF ever in the history of ETFs. So, we’re talking about massive, massive adoption.” This widespread adoption has fueled speculation about which cryptocurrencies might be next in line for ETF launches.
Potential Players in the Solana ETF Space
Despite the tepid demand for Solana ETFs so far, several asset managers are exploring the possibility of launching their own SOL ETFs. Franklin Templeton, VanEck, and 21Shares have all expressed interest in entering this market. However, BlackRock, the world’s largest ETF manager by AUM, has opted not to pursue a Solana ETF, citing “very little interest” from its clients.
Tischhauser suggests that while smaller issuers may find launching Solana ETFs to be financially viable, these products are unlikely to have a significant impact on the broader crypto market. “Smaller issuers may make more money than their expenses by launching and running these products,” she explained. “But it’s not going to be significant for the crypto market—it’s not going to be exciting.”
The future of Solana ETFs in the U.S. appears to be a niche market with limited appeal, particularly when compared to the overwhelming demand for Bitcoin and Ethereum ETFs. While there is some interest in Solana as an investment, it has yet to achieve the level of recognition and adoption necessary to drive substantial demand for related financial products. As a result, Solana ETFs are likely to remain a specialized option for a small segment of the market, rather than a major force in the crypto investment landscape.
For now, it seems that Solana’s journey to becoming a mainstream investment vehicle still has a long way to go, with Bitcoin and Ethereum continuing to dominate the ETF space. Investors and asset managers will be watching closely to see if Solana can eventually gain the traction needed to challenge the market leaders.
Bybit Expands Solana-Based Assets, Adds PayPal's PYUSD Stablecoin
In related news, Bybit, one of the world’s leading cryptocurrency exchanges, has announced a significant expansion of its support for Solana-based assets. In a press release dated Aug. 15, the company revealed the addition of PayPal's PYUSD stablecoin to its platform, marking a notable development in the integration of decentralized finance (DeFi) assets into mainstream financial ecosystems.
The inclusion of PYUSD on Bybit is indicative of the growing influence and adoption of PayPal's stablecoin across the digital asset landscape. PYUSD recently achieved a major milestone, surpassing 500,000 processed transactions, which shines the spotlight on its increasing utility in various financial applications. The stablecoin’s expanding footprint within the DeFi space has led to it quickly becoming a preferred choice for transactions and liquidity provision.
According to data from DeFi analytics platform DefiLlama, more than 54% of PYUSD's market liquidity is currently concentrated on the Solana blockchain, with the remainder residing on Ethereum (ETH).
PYUSD’s rapid ascent in the stablecoin market is further evidenced by its ranking as the sixth-largest stablecoin by market capitalization. Notably, it has also recorded the highest month-on-month growth among its peers, with a 30.7% increase, according to DefiLlama. This impressive growth rate signals a strong market demand for PYUSD, particularly as it becomes more integrated into various blockchain ecosystems.
Commenting on the listing, Emily Bao, head of web3 and strategic business units at Bybit, emphasized the importance of PYUSD’s performance on Solana. "The stablecoin’s performance on Solana has demonstrated the market’s demand for a regulated, secure stablecoin that can keep pace with the rapid developments in decentralized finance," Bao stated. This strategic expansion aligns with Bybit's broader vision of supporting a diverse range of digital assets that cater to the evolving needs of its user base.
Bybit's decision to enhance its Solana-based offerings reflects the platform's commitment to staying at the forefront of DeFi innovation. Solana's blockchain, known for its scalability and efficiency, provides an ideal environment for stablecoins like PYUSD to thrive, especially as the demand for faster and cheaper transactions continues to grow.
PayPal’s launch of PYUSD in August 2023 marked a significant moment in the intersection of traditional finance and digital currencies. As the first major financial institution to issue its own stablecoin, PayPal set a precedent for the integration of blockchain technology into mainstream financial services. PYUSD is backed by U.S. dollar deposits, short-term Treasuries, and other cash equivalents, providing users with a secure and stable asset that can be used across various financial applications.
The stablecoin is a product of PayPal's partnership with Paxos, a leading blockchain company known for its expertise in issuing regulated stablecoins. This collaboration has allowed PayPal to leverage Paxos’ infrastructure to offer a stablecoin that meets the stringent regulatory requirements of the U.S. financial system.
However, PayPal's foray into the stablecoin market has not been without challenges. A few months after the launch of PYUSD, PayPal disclosed that it had received an investigative subpoena from the U.S. Securities and Exchange Commission (SEC) regarding its stablecoin activities. While details of the investigation remain undisclosed, this development reiterates the regulatory scrutiny that accompanies the issuance of digital currencies by large financial entities.
Expanding PYUSD’s Reach: Solana as a Strategic Choice
In late May, PayPal expanded its support for PYUSD to the Solana blockchain, a move driven by the network’s significant advantages for commerce use cases. Solana’s high throughput and low transaction costs make it an attractive option for businesses and consumers looking to leverage stablecoins for everyday transactions. By extending PYUSD’s reach to Solana, PayPal is positioning its stablecoin to capitalize on the growing adoption of blockchain technology in the global payments landscape.
The strategic choice to support Solana reflects PayPal's recognition of the blockchain's potential to facilitate efficient and scalable financial transactions. As more users and developers migrate to Solana, the network’s role in the broader DeFi ecosystem is expected to grow, further solidifying PYUSD’s position as a key player in the stablecoin market.
