Original author: 0xTodd
Source: Twitter
Why is it hard for SOL ETFs to wait? Because it has the potential not to make money. Last week, Cathie Wood's Ark Fund decided to withdraw its ETH ETF application.
The Ark BTC ETF ranks 4th (market share of 6%, and the top 3 are BlackRock, Grayscale and Fidelity), but according to market speculation, it is "not very profitable". The main reason is that the fees of BTC ETFs are lower than those of traditional ETFs, many of which are in the range of 0.19-0.25%, and ETFs are also doing "fee races".
According to simple estimates, with the current scale of the Ark BTC ETF, it can earn about $7 million in management fees a year, so the corresponding cost is about the same order of magnitude. Therefore, if the Ark BTC ETF is still hovering near the profit line, then for the Ark, the strong push of the ETH ETF may turn into a loss-making transaction. So even Ark can only reluctantly give up ETH ETFs.
From a purely business point of view, a mainstream coin with a lower market capitalization, such as $SOL, has a market cap of 5% of $BTC, and if it wants to recover the cost of $7 million per year, an ETF must manage at least 20 million SOLs.
BlackRock, the current top crypto ETF, only manages 1.5% of the BTC on the network, while 20 million SOLs means 4.5% of $SOL paper circulation.
In addition, take into account:
(1) SOL is inherently more difficult to raise than BTC with no yield. SOL can earn about 8% on the chain, but ETFs are forbidden to include staking. Holding an SOL ETF is equivalent to naturally underperforming on-chain SOL by 8%, and Bitcoin is only underperforming by 0.2% management fees.
Taking grayscale as an example, GBTC peaks at 600,000, while SOL peaks at only 450,000, which is significantly lower than BTC.
(2) The paper circulation of SOL is 460 million, which may actually be much lower than this, which everyone understands.
A lower circulating market capitalization requires a larger position to be held in the face of high interest rates and regulatory pressure. So, with SOL's current market capitalization and circulation, I'm afraid it's hard to make these institutions profitable.
In business, who has the motivation to promote unprofitable business?