On March 20, 2025, the Volatility Shares Solana ETF (SOLZ) launched as the first Solana ETF in the USA, alongside its leveraged counterpart, the 2X Solana ETF (SOLT), marking a milestone for cryptocurrency investment products in the country. These futures-based ETFs, built on Solana futures trading and introduced by the Chicago Mercantile Exchange, offer investors exposure to Solana (SOL) without direct ownership, distinguishing them from the still-pending spot Solana ETF filings by firms like VanEck and Grayscale.
In our article today, we shall be discussing this pioneering move as it not only broadens institutional access to Solana, but also has the potential to transform passive ETF investors into active users by sparking interest in Solana’s ecosystem. This way, they are encouraged to explore the blockchain, engage with its dApps, and even hold SOL directly while gaining familiarity with the ecosystem through this accessible investment vehicle.
A Solana ETF (Exchange-Traded Fund) is an investment device designed to track the performance of Solana (SOL), the native cryptocurrency of Solana blockchain network. Known for its scalability, low transaction costs, and fast processing speeds, Solana has become a popular choice for decentralized applications, DeFi, NFTs, and more. This has attracted investors to seek exposure to this token as a commodity to exploit its price movement, without needing to directly purchase, hold, or utilize the cryptocurrency themselves.
Typically, the ETF is created by a financial institution (the issuer) that acquires SOL or related financial instruments (like futures contracts) to back the trading fund. Shares of the ETF represent a portion of the underlying assets. These shares are then listed and traded on traditional stock exchanges (e.g., NYSE or NASDAQ), allowing investors to buy and sell them through standard brokerage accounts during market hours. The aim of this structure is to simplify access to Solana for web2 investors unfamiliar with crypto or blockchain technology, while offering a regulated and potentially less risky way to invest in the asset.
ETF investors are individuals or entities who purchase shares of the exchange-traded funds to gain exposure to the assets tracked by the fund, in this case, Solana. They can be categorized as follows:
Everyday individuals drawn to ETFs for its simplicity, who by avoiding the technical complexities of crypto ownership, prefer to invest through brokerage accounts.
Large organizations like hedge funds, pension funds, asset management firms, or banks, e.g VanEck, 21Shares or Grayscale, who invest in ETFs by creating them. They often seek exposure to ETFs of tokens for their potentials, while adhering to compliance and risk management frameworks.
High-net-worth individuals or entities who often participate in early state product launch, meeting specific financial thresholds.
These are investors focused on leveraging ETF liquidity to trade token exposure daily. This includes crypto enthusiasts, private investors, and financial accounts managers.
These different classes of ETF investors benefit from the liquidity, regulatory oversight, and ease of access via ETFs compared to direct crypto ownership, representing a mix of traditional finance participants who are crypto-curious, yet challenged or skeptical about fully tapping into crypto's growth.
Several key barriers deter ETF investors from simply becoming active crypto users, with technical complexity and security concerns standing out as the most significant hurdles. ETF investors enjoy the simplicity of buying and selling shares through familiar brokerage accounts, whereas active crypto use demands the understanding of blockchain technology, setting up digital wallets, and managing private keys, all of which presents a steep learning curve for those unaccustomed to decentralized systems.
The fear of irreversible mistakes, such as losing a seed phrase or sending funds to the wrong address, further discourages many newbies. While ETFs offer custodial security managed by regulated entities, active crypto users must be responsible for safeguarding their assets against hacks, phishing, or wallet vulnerabilities. And without a centralized safety net like banks’ fraud protections, this heightened risk associated with crypto keeps many ETF investors from transitioning to direct engagement.
Regulatory uncertainty and risk aversion also play critical roles in maintaining this divide. ETF investors value the oversight of bodies like the SEC, which lends legitimacy and stability to their investments. Whereas, the crypto space remains a regulatory gray area that lacks clarity, coupled with complex tax obligations and legal risks in some regions, contrasts sharply with the structured environment ETFs provide.
Moreover, ETFs buffer crypto’s volatility through institutional management, appealing to risk-averse investors like retirees or conservative institutions. Active crypto use, however, exposes users to Solana’s full price swings, network outages, and ecosystem risks (e.g., smart contract failures), making it less palatable for those prioritizing safety and predictability over the hands-on potential of decentralized finance.
Web3 teams aiming to convert ETF investors into active crypto users must tackle barriers such as technical complexity, security concerns, regulatory uncertainty, and risk aversion with strategies that make the shift for these investors safe, seamless, and interesting.
A key approach is simplified onboarding and education, which lowers the entry threshold for ETF investors accustomed to traditional finance. By developing user-friendly wallets with guided setups, and can auto-generate and securely store seed phrases with a recovery email option, teams can introduce a familiar interface to suit these investors. Pairing this with gamified learning modules that reward users with small amounts of tokens or NFTs for completing lessons, or staking, DeFi, etc, can build confidence and familiarity. Targeted educational content can further bridge the gap, highlighting benefits like higher returns or beneficial control with crypto in a way that resonates with their existing investment mindset.
Another critical strategy involves one-click setups and onchain transactions to mirror the simplicity ETF investors expect from brokerages. Web3 teams could offer pre-configured wallets that integrate with platforms like Fidelity, enabling users to convert ETF shares into SOL with a single action. Streamlined actions like a “Stake Now” button, or “Pay Now” for Solana Pay, provides an instantaneous opportunity to showcase crypto’s utility without any complexity.
Enhancing security and trust is equally vital to reassure ETF investors wary of hacks or loss. Wallets with multi-factor authentication, biometric logins, and insured custody options provide a safety net akin to institutional safeguards. Educational campaigns on securing seed phrases or avoiding phishing, framed in terms ETF investors understand, can ease them into the rigidity of self-custody.
Collaborating with regulators for compliant Testnet environments could also alleviate fears of legal ambiguity, while incentives like low-stakes trials and exclusive staking bonuses and rewards could also ease and create a beneficial sense to the entire endeavor.
ETF investors represent a major adoption opportunity for crypto and Web3 because they embody an interest group form the traditional finance (TradFi), who are interested in the decentralized future, but not willing to play in the crypto market. For them, they require significant capital, credibility, and familiarity to their own ecosystem, using regulated vehicles or trusts. Accustomed to their own methods of operation, this group intends to introduce substantial trillions in their markets to crypto, yet remains largely on the sidelines of active crypto use.
Web3 builders are now being forced to look towards attracting these investors, and must prioritize seamless onboarding and rewarding experiences to gain the attention of these skeptical observers. Imagine converting even a fraction of these investors into active users, how much it could drive mass adoption, injecting liquidity into DeFi, boosting blockchain usage, and legitimizing Web3 in mainstream finance.
