Fund Manager Grayscale Launches First Solana Trust Product, Here Are The Risks They Cited in Report

Fund Manager Grayscale Launches First Solana Trust Product, Here Are The Risks They Cited in Report


Fund Manager Grayscale Launches First Solana Trust Product, Here Are The Risks They Cited in Report. Photo Credit: dulezidar istock

Grayscale investments, the world’s largest digital currency asset manager, launched Grayscale Solana Trust, the sixteenth product in Grayscale’s suite of investment offerings, that caters to institutional and high net-worth investors.

The product will offer exposure to SOL, the native token used on the Solana blockchain. The launch comes two months after Grayscale rival Osprey Funds launched a Solana trust product.

The Grayscale Solana Trust will be the firm’s other single-asset investment trusts, together with those that provide exposure to Bitcoin, Bitcoin cash, Ethereum, and Litecoin, among others. The Solana Trust has an investment minimum of $25,000 and an annual fee of 2.5 percent.

Solana, a layer-one protocol, is widely seen as a competitor to fellow smart contract platform Ethereum, which has been plagued by high fees and slow transactions.

Its native token, also known as Solana, is now the fourth-largest cryptocurrency with a market capitalization of over $64 billion and has returned more than 10,000 percent year-to-date.

“Solana is faster and cheaper, so it’s been a really great on-ramp for folks looking to buy NFTs, DeFi, or various applications being built on top of it,” said Grayscale CEO Michael Sonnenshein.

“We are really seeing it as a platform where the users can learn, experiment, and build in a way that is perhaps more cost-effective than some other blockchain networks like Ethereum,” he added.

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Solana has been experiencing growing pains, for instance, the network shut down for approximately 17 hours in September due to transaction load management problems.

Other potential risks that Solana faces apart from competing networks are economics and valuation, level of centralization, regulatory uncertainty, and network security.

Solana could face scrutiny from various regulators, which to date have often only identified Bitcoin and Ethereum as assets excluded from being classified as securities.

Solana network fee revenue is still relatively low compared to other blockchains, such as Ethereum. Unless fees grow from new applications, increased usage, or higher fees, the valuation may not be supported based on cash-flows value.

Solana has become the third asset to have a standalone price tracker in November in the Bloomberg terminal after Bitcoin and Ethereum, the two largest crypto assets by market cap. Bloomberg partnered with Galaxy to launch the Bloomberg Galaxy Solana Index.

Solana’s rapid ascent may be accredited to the support of heavyweights such as Sam Bankman-Fried, founder of crypto exchange FTX, who said that Solana has the capacity for mass adoption.