Solana ETF Launch Fails to Spark Institutional Demand

The launch of the Solana ETF, which includes staking capabilities, has sparked a brief rally in the price of the SOL token. This event has highlighted renewed interest in Solana within the competitive crypto landscape. The ETF, a collaboration between REX Shares and Osprey Funds, utilizes a taxable C-corporation structure to expedite its market entry, bypassing the lengthy SEC approval process. However, this structure introduces tax inefficiencies that may limit its appeal to institutional investors, who are accustomed to the tax advantages of traditional Bitcoin and Ethereum ETFs.

Despite the initial enthusiasm, institutional demand for Solana remains subdued. The Grayscale Solana Trust (GSOL), which has been operational for over two years, manages only $75 million in assets. This figure is significantly lower than the $10 billion amassed by Grayscale’s Ethereum Trust before the launch of the Ethereum spot ETF. This disparity suggests that the ETF launch alone is unlikely to drive SOL prices beyond the $200 mark in the near term.

Solana faces additional challenges from substantial token unlocks and ongoing sell-offs by prominent decentralized applications. Approximately $585 million worth of SOL will be unlocked from staking over the next two months, potentially increasing sell pressure. High-profile DApps, such as the token launch platform Pump, have transferred over $404 million in SOL to exchanges in 2025, indicating continued liquidation activity. This selling pressure, combined with subdued network activity, has kept SOL’s price gains in line with competitors like Ethereum (ETH) and Binance Coin (BNB) over the past month, despite the bullish ETF announcement.

The futures funding rate for SOL further reflects cautious trader sentiment, remaining below the 10% annualized threshold typically associated with strong bullish leverage. Solana’s network revenue has declined sharply, dropping over 90% since January, indicating waning onchain activity despite occasional hype around memecoins. The emergence of alternative platforms has also eroded Solana’s position as a preferred network for high-throughput decentralized applications. For instance, Robinhood’s choice of an Ethereum layer-2 solution for tokenized stock trading and Coinbase’s partnership with Shopify to enable onchain payments on the Base network highlight shifting developer and user preferences toward Ethereum-based ecosystems.

These developments suggest that Solana’s competitive edge is under pressure, and the recent ETF launch, while innovative, may not be sufficient to reverse the broader trend of declining institutional interest and network usage. While the Solana staking ETF launch represents a noteworthy innovation in crypto investment products, its impact on SOL’s price and institutional demand appears limited. The combination of token unlocks, DApp sell-offs, and intensifying competition from Ethereum-centric platforms constrains the potential for a sustained rally. Investors should monitor these fundamental factors closely, as the ETF’s unique structure and market context suggest cautious optimism rather than a definitive bullish breakout.