The world of cryptocurrency ETFs seems to be expanding now, but not all digital assets are poised to easily transition into this financial product. analysis The potential for ETFs across multiple cryptocurrencies has provided insights that put XRP and Cardano in a difficult position for ETF adaptations.
Using a comprehensive scoring system, GSR evaluates cryptocurrencies on a scale that integrates decentralization metrics and market demand indicators.
XRP and Caradano: Will We Never See the Light of the ETF?
Decentralization is crucial, with aspects such as permissionless sharing and the diversity of devices used in networks being examined.
Key metrics such as the Nakamoto coefficient measure the concentration of operational power within a network, revealing vulnerabilities to potential collusion or control by multiple entities.
For XRP and Cardano, decentralization scores were significantly low, with XRP -0.9 and Cardano -0.1, indicating concerns about their network structures.
In addition to decentralization, order potential is equally important, taking into account market capitalization, trading volume, and community activity levels. These factors predict the amount of interest that may exist in ETFs based on each cryptocurrency.
Despite their popularity, XRP and Cardano scored -0.2 and -0.5 on demand metrics, which places them behind other cryptocurrencies that show stronger indicators of future market demand.
This combination of low decentralization scores and demand in the GSR analysis suggests that XRP and Cardano may face significant hurdles before seeing the launch of their ETFs, especially in a market that is rapidly adapting and evolving.
Meanwhile, in contrast to the sluggish outlook for XRP and Cardano ETFs from the GSR report, other cryptocurrencies such as Ethereum, Solana, and NEAR are seeing more optimistic valuations.
Focus on Solana and other approved ETFs
Notably, by incorporating valuations from assets, GSR’s methodology for ETF potential score gives a weight of 33% to decentralization and 67% to demand in the overall scoring system.
However, VanEck, a significant player in the asset management space, has taken a pioneering step by filing for the first-ever Spot Solana exchange-traded fund with the U.S. Securities and Exchange Commission (SEC).
The move underscores Solana’s growing position as a prominent competitor to Ethereum. According to Matthew Siegel, head of digital asset research at VanEck, “With its combination of scalability, speed, and low costs, Solana blockchain has the potential to provide an enhanced user experience across a wide range of use cases.”
However, the landscape remains mixed for Bitcoin and Ethereum. While spot Bitcoin ETFs have seen volatile inflows, a potential Ethereum ETF is still awaiting final S-1 approvals, which are expected to come soon.
The market reception to these developments has been cautious, reflecting the slow pace of inflows into spot Bitcoin ETFs despite the positive trend in recent days.
Featured image of DALL-E, chart from TradingView