K33: A Selling Frenzy Unlikely Post Launch of SOL ETF, While LTC ETF May Face the Opposite

BlockBeats reported on June 18 that digital asset brokerage and research firm K33 stated that with the U.S. Securities and Exchange Commission (SEC) adopting a more favorable stance towards cryptocurrencies, new spot altcoin ETFs might be approved in the coming months. This development would provide investors with some compelling long-short strategy opportunities.

Currently, eight institutions have submitted applications for a spot Solana (SOL) ETF. The SEC has proactively reached out to asset management firms, requesting that staking provisions be included in updated application filings. K33 analyst Lunde highlighted that this signals increased regulatory engagement and raises the possibility of Ethereum and Solana ETFs incorporating staking functionalities. Furthermore, in addition to Solana, ETF applications have been filed for other crypto assets such as LTC, XRP, and DOGE.

Lunde noted that when Bitcoin and Ethereum ETFs were previously launched, a so-called "Grayscale Effect" occurred. This refers to Grayscale's trust funds converting into ETFs and subsequently releasing large holdings into the market, leading to a sale of over 50% of the assets under management within 200 days. However, for the potential new ETF assets, the situation with Grayscale is somewhat different. Unlike XRP and Dogecoin, Grayscale's Solana and Litecoin trusts are already trading on the public market, making them more directly comparable.

Lunde stated that Grayscale's Solana Trust, launched in 2023, has never traded at a discount and holds only 0.1% of SOL's total supply, thereby posing minimal risk of market sell-offs. In contrast, Grayscale's Litecoin Trust often trades at a discount, holding 2.65% of LTC's total supply, and is facing renewed discount pressure following recent physical purchases. Additionally, only two institutions, Canary Capital and CoinShares, have applied for a Litecoin ETF, indicating potentially low market liquidity, which might struggle to absorb any sell-off pressure.

Lunde believes that the structure of the Solana ETF is more straightforward, while the Litecoin product might experience fund outflows similar to those seen with GBTC and ETHE after their conversions. As such, following the launch of these ETFs, a strategy involving longing SOL while shorting LTC could be attractive, especially if both ETFs are listed simultaneously.