MW A new crypto frontier is emerging on Wall Street, beyond bitcoin and ether. But here are the risks.

By Frances Yue

A new investment vehicle was launched Wednesday that offers investors exposure to a lesser-known cryptocurrency through traditional brokerage accounts, pointing to a fresh frontier in the digital-asset craze.

It's a development some analysts say could pave the way for a flurry of exchange-traded funds, or ETFs, pegged to smaller digital assets. But investors also may want to approach it with a healthy dose of caution.

The ETF goes by REX-Osprey Solana + Staking ETF, or SSK SSK, and invests directly in Solana (SOLUSD), the world's sixth-largest cryptocurrency by market capitalization. It started trading Wednesday on the Cboe BZX Exchange, and marks the first ETF in the U.S. to invest directly in Solana, a token based on a blockchain widely seen as one of Ethereum's strongest competitors.

This could mark a major step for financial players who want to bring Solana into the mainstream, since it gives U.S. investors access to the cryptocurrency without them needing to hold the token directly.

Greg King, founder and chief executive of REX Financial and Osprey Funds, told MarketWatch that he expects SSK's initial investors to be mostly retail, with gradual expansion to institutional investors and registered investment advisors. That means any of its early successes - or failures - would be borne mostly by individuals, not institutions.

The launch comes on the heels of last year's new breed of ETFs that invest in bitcoin (BTCUSD) and ether (ETHUSD). Crypto bulls have been hoping to make digital assets not only easy for investors to tap into but for them to become a cog in financial markets.

But REX Financial isn't as big of an institutional player as BlackRock $(BLK)$ or Fidelity, which were behind last year's batch of crypto ETFs. Analysts also cautioned that the new vehicle may face limited investor interest, in part because it will be tied to smaller cryptocurrencies, which could struggle to generate meaningful demand.

"It's always tough to tell, but I think that it'll set a precedent...then you're just going to have a bunch of small ETFs out in the market that aren't generating enough revenue long term," said Louis LaValle, co-founder at crypto investment firm Frontier Investments, in an interview. In one or two years, if such ETFs do not see enough demand, "all those ETF providers are just going to shut those ETFs down," LaValle said.

In response, King pointed to a post on X from Eric Balchunas, senior ETF analyst at Bloomberg, who said the trading volume of SSK already reached $20 million as of 11:44 a.m. Eastern on Wednesday, placing it in the top 1% of new launches.

SSK rose 42 cents, or 1.5%, to end at $25.85 in its first day of trading Wednesday, according to FactSet data. Solana rose 4.2% to $153.81, roughly 48% off its record high of $294.43 reached on Jan. 19. Bitcoin advanced 3.9% to $109,657, down about 2.4% from its all-time high of $111,986 hit on May 22.

Crypto-friendly Trump administration

The Trump administration has taken a more friendly tone to the crypto industry, helping to establish a bitcoin reserve. President Donald Trump also launched his own namesake meme coin, as did his wife Melania.

The shift in the regulatory landscape has been credited with helping open the door to the new Solana-based ETF to enter the market.

The Securities and Exchange Commission in 2024 under the Biden administration approved ETFs holding bitcoin and ether, but rejected Solana-based ETFs, citing concerns over market manipulation and a lack of investor safeguards. Bitcoin and ether have become the world's largest cryptocurrencies by market capitalization and, thus far, have gained the strongest acceptance by institutional investors.

In general, the regulatory environment has become more friendly and accepting of smaller crypto currencies beyond bitcoin and ether, said Roxanna Islam, head of sector and industry research at index provider VettaFi.

Islam said she expects more ETFs that invest in smaller cryptos, such as XRP, Cardano and litecoins, to be approved by the end of the year. "They fall into the same category as Solana," Islam said.

This week, the SEC also approved the conversion of Grayscale's Digital Large Cap Fund GDLC into an exchange-traded fund, which was the first time the regulator approved an ETF that invests in multiple crypto assets other than bitcoin and ether, according to a Tuesday filing. While the fund invests in bitcoin, ether, Solana, XRP (XRPUSD) and Cardano (ADAUSD), the majority of its assets were concentrated in the first two assets.

Not a pure Solana play

It's worth noting that the Rex-Osprey ETF differs in other ways from the bitcoin and ether ETFs launched last year by financial powerhouses BlackRock, Fidelity and others.

To start with, SSK isn't a "pure-play" Solana ETF, Islam said. Unlike the bitcoin and ether ETFs, which invest 100% directly in their respective cryptocurrencies, SSK allocates at least 40% of its assets to other Solana ETFs, mostly issued outside of the U.S., with the remainder primarily invested in Solana, according to the ETF's prospectus.

It's unlikely that the foreign exposure will add more risk to the ETF since the underlying asset is Solana and not a foreign security, Islam said. The fund will also attempt to invest in the USD share class, according to the ETF's prospectus. Thus there shouldn't be much currency risk, Islam added.

The fund also aims to stake its Solana holdings, meaning that it would lock up the tokens to secure the Solana blockchain, earn rewards and pass those staking rewards on to investors. Staking Solana was forecast to generate an annual return of about 7.3%, according to data from several staking service providers, and a statement by REX Financial and Osprey Funds, co-issuers of SSK.

SSK has been the first crypto ETF in the market to allow staking. While the Ethereum blockchain also supports staking, ether ETFs do not stake their holdings due to previous regulatory concerns of the SEC. Investors can receive passive income through staking rewards, which could push up potential returns. However, there also have been risks associated with staked tokens, which are usually locked up, including the potential for losses stemming from malicious activities or network instability.

That said, there may be "good reasons" for investors to wait for other Solana-based ETFs that also seek to capture a staking yield, according to Alex Thorn, head of firmwide research at crypto investment bank Galaxy Digital. Nine other potential issuers that have applied to launch Solana ETFs, including Fidelity, Franklin Templeton, VanEck and others, are still awaiting decisions from the SEC. Some investors prefer ETFs backed by large financial institutions because they offer greater trust with strong track records.

Another consideration is that SSK's management fees are significantly higher than most bitcoin and ether ETFs, and potentially could be higher than most other proposed Solana ETFs, if approved, according to Thorn. SSK has a management fee of 0.75% and an income-tax expense of 0.65%, pushing up its total annual operating expenses to 1.4%. In comparison, most bitcoin ETFs have management fees of 0.25% or lower. However, the Grayscale bitcoin trust ETF GBTC has a management fee of as high as 1.5%.

Kings said that with Grayscale bitcoin trust ETF charging a management fee of 1.5%, and many non-U.S. Solana exchange-traded products keeping some staking rewards for issuers, "we think SSK is a fair deal for our investors."

SSK is structured differently partly because it was filed under the Securities Act of 1940, unlike most of the spot bitcoin and ether ETFs, which are governed by the Securities Act of 1933, said Islam. It is hard to say which route is easier, but the SEC's decision to approve SSK ahead of other proposed Solana ETFs may suggest that the regulator prefers the former's structure when it comes to ETFs that allow staking, Islam said.

Other potential Solana ETF issuers filed applications under the 1933 act. Both acts are securities regulation - the 1940 act regulates the structure and operations of investment companies, while the 1933 one regulates the offering and sale of securities.

ETFs that are governed under the 1940 act tend to face higher taxes than those governed by the 1933 act, while SSK's investment in other Solana ETFs also contribute to its higher costs, said Islam.

If other spot Solana ETFs are approved, SSK fund could have the first-mover advantage in the competition, but it could face the setback of higher fees, Islam said.

Demand in question

Investors also questioned how much demand Solana ETFs, or other smaller crypto ETFs, might attract in general, given that ether ETFs have drawn significantly less interest than their bitcoin counterparts.

Bitcoin ETFs, which were launched in January 2024, managed a total of $131.6 billion assets as of Tuesday, while ether ETFs, which were launched in July 2024, managed $9.9 billion assets, according to the Dow Jones Market Data. Since July 23, 2024, when ether ETFs were first launched, bitcoin ETFs saw total inflows of $38.6 billion, while their ether counterparts saw inflows of only $4.2 billion.

"Bitcoin's market cap is six times bigger than ether. But the bitcoin ETF flows have been more than six times bigger than the ether ETF flows," said Galaxy's Thorn.

It's partly because ether's investment use case was "not as well played out" as bitcoin, LaValle said. Bitcoin supporters have touted the crypto's potential to become a store of value, while ethereum and Solana are mostly seen as blockchains that power smart contracts, or self-executing computer programs that eliminate middlemen.

MW A new crypto frontier is emerging on Wall Street, beyond bitcoin and ether. But here are the risks.

By Frances Yue

A new investment vehicle was launched Wednesday that offers investors exposure to a lesser-known cryptocurrency through traditional brokerage accounts, pointing to a fresh frontier in the digital-asset craze.

It's a development some analysts say could pave the way for a flurry of exchange-traded funds, or ETFs, pegged to smaller digital assets. But investors also may want to approach it with a healthy dose of caution.

The ETF goes by REX-Osprey Solana + Staking ETF, or SSK SSK, and invests directly in Solana (SOLUSD), the world's sixth-largest cryptocurrency by market capitalization. It started trading Wednesday on the Cboe BZX Exchange, and marks the first ETF in the U.S. to invest directly in Solana, a token based on a blockchain widely seen as one of Ethereum's strongest competitors.

This could mark a major step for financial players who want to bring Solana into the mainstream, since it gives U.S. investors access to the cryptocurrency without them needing to hold the token directly.

Greg King, founder and chief executive of REX Financial and Osprey Funds, told MarketWatch that he expects SSK's initial investors to be mostly retail, with gradual expansion to institutional investors and registered investment advisors. That means any of its early successes - or failures - would be borne mostly by individuals, not institutions.

The launch comes on the heels of last year's new breed of ETFs that invest in bitcoin (BTCUSD) and ether (ETHUSD). Crypto bulls have been hoping to make digital assets not only easy for investors to tap into but for them to become a cog in financial markets.

But REX Financial isn't as big of an institutional player as BlackRock $(BLK.AU)$ or Fidelity, which were behind last year's batch of crypto ETFs. Analysts also cautioned that the new vehicle may face limited investor interest, in part because it will be tied to smaller cryptocurrencies, which could struggle to generate meaningful demand.

"It's always tough to tell, but I think that it'll set a precedent...then you're just going to have a bunch of small ETFs out in the market that aren't generating enough revenue long term," said Louis LaValle, co-founder at crypto investment firm Frontier Investments, in an interview. In one or two years, if such ETFs do not see enough demand, "all those ETF providers are just going to shut those ETFs down," LaValle said.

In response, King pointed to a post on X from Eric Balchunas, senior ETF analyst at Bloomberg, who said the trading volume of SSK already reached $20 million as of 11:44 a.m. Eastern on Wednesday, placing it in the top 1% of new launches.

SSK rose 42 cents, or 1.5%, to end at $25.85 in its first day of trading Wednesday, according to FactSet data. Solana rose 4.2% to $153.81, roughly 48% off its record high of $294.43 reached on Jan. 19. Bitcoin advanced 3.9% to $109,657, down about 2.4% from its all-time high of $111,986 hit on May 22.

Crypto-friendly Trump administration

The Trump administration has taken a more friendly tone to the crypto industry, helping to establish a bitcoin reserve. President Donald Trump also launched his own namesake meme coin, as did his wife Melania.

The shift in the regulatory landscape has been credited with helping open the door to the new Solana-based ETF to enter the market.

The Securities and Exchange Commission in 2024 under the Biden administration approved ETFs holding bitcoin and ether, but rejected Solana-based ETFs, citing concerns over market manipulation and a lack of investor safeguards. Bitcoin and ether have become the world's largest cryptocurrencies by market capitalization and, thus far, have gained the strongest acceptance by institutional investors.

In general, the regulatory environment has become more friendly and accepting of smaller crypto currencies beyond bitcoin and ether, said Roxanna Islam, head of sector and industry research at index provider VettaFi.

Islam said she expects more ETFs that invest in smaller cryptos, such as XRP, Cardano and litecoins, to be approved by the end of the year. "They fall into the same category as Solana," Islam said.

This week, the SEC also approved the conversion of Grayscale's Digital Large Cap Fund GDLC into an exchange-traded fund, which was the first time the regulator approved an ETF that invests in multiple crypto assets other than bitcoin and ether, according to a Tuesday filing. While the fund invests in bitcoin, ether, Solana, XRP (XRPUSD) and Cardano (ADAUSD), the majority of its assets were concentrated in the first two assets.

Not a pure Solana play

It's worth noting that the Rex-Osprey ETF differs in other ways from the bitcoin and ether ETFs launched last year by financial powerhouses BlackRock, Fidelity and others.

To start with, SSK isn't a "pure-play" Solana ETF, Islam said. Unlike the bitcoin and ether ETFs, which invest 100% directly in their respective cryptocurrencies, SSK allocates at least 40% of its assets to other Solana ETFs, mostly issued outside of the U.S., with the remainder primarily invested in Solana, according to the ETF's prospectus.

It's unlikely that the foreign exposure will add more risk to the ETF since the underlying asset is Solana and not a foreign security, Islam said. The fund will also attempt to invest in the USD share class, according to the ETF's prospectus. Thus there shouldn't be much currency risk, Islam added.

The fund also aims to stake its Solana holdings, meaning that it would lock up the tokens to secure the Solana blockchain, earn rewards and pass those staking rewards on to investors. Staking Solana was forecast to generate an annual return of about 7.3%, according to data from several staking service providers, and a statement by REX Financial and Osprey Funds, co-issuers of SSK.

SSK has been the first crypto ETF in the market to allow staking. While the Ethereum blockchain also supports staking, ether ETFs do not stake their holdings due to previous regulatory concerns of the SEC. Investors can receive passive income through staking rewards, which could push up potential returns. However, there also have been risks associated with staked tokens, which are usually locked up, including the potential for losses stemming from malicious activities or network instability.

That said, there may be "good reasons" for investors to wait for other Solana-based ETFs that also seek to capture a staking yield, according to Alex Thorn, head of firmwide research at crypto investment bank Galaxy Digital. Nine other potential issuers that have applied to launch Solana ETFs, including Fidelity, Franklin Templeton, VanEck and others, are still awaiting decisions from the SEC. Some investors prefer ETFs backed by large financial institutions because they offer greater trust with strong track records.

Another consideration is that SSK's management fees are significantly higher than most bitcoin and ether ETFs, and potentially could be higher than most other proposed Solana ETFs, if approved, according to Thorn. SSK has a management fee of 0.75% and an income-tax expense of 0.65%, pushing up its total annual operating expenses to 1.4%. In comparison, most bitcoin ETFs have management fees of 0.25% or lower. However, the Grayscale bitcoin trust ETF GBTC has a management fee of as high as 1.5%.

Kings said that with Grayscale bitcoin trust ETF charging a management fee of 1.5%, and many non-U.S. Solana exchange-traded products keeping some staking rewards for issuers, "we think SSK is a fair deal for our investors."

SSK is structured differently partly because it was filed under the Securities Act of 1940, unlike most of the spot bitcoin and ether ETFs, which are governed by the Securities Act of 1933, said Islam. It is hard to say which route is easier, but the SEC's decision to approve SSK ahead of other proposed Solana ETFs may suggest that the regulator prefers the former's structure when it comes to ETFs that allow staking, Islam said.

Other potential Solana ETF issuers filed applications under the 1933 act. Both acts are securities regulation - the 1940 act regulates the structure and operations of investment companies, while the 1933 one regulates the offering and sale of securities.

ETFs that are governed under the 1940 act tend to face higher taxes than those governed by the 1933 act, while SSK's investment in other Solana ETFs also contribute to its higher costs, said Islam.

If other spot Solana ETFs are approved, SSK fund could have the first-mover advantage in the competition, but it could face the setback of higher fees, Islam said.

Demand in question

Investors also questioned how much demand Solana ETFs, or other smaller crypto ETFs, might attract in general, given that ether ETFs have drawn significantly less interest than their bitcoin counterparts.

Bitcoin ETFs, which were launched in January 2024, managed a total of $131.6 billion assets as of Tuesday, while ether ETFs, which were launched in July 2024, managed $9.9 billion assets, according to the Dow Jones Market Data. Since July 23, 2024, when ether ETFs were first launched, bitcoin ETFs saw total inflows of $38.6 billion, while their ether counterparts saw inflows of only $4.2 billion.

"Bitcoin's market cap is six times bigger than ether. But the bitcoin ETF flows have been more than six times bigger than the ether ETF flows," said Galaxy's Thorn.

It's partly because ether's investment use case was "not as well played out" as bitcoin, LaValle said. Bitcoin supporters have touted the crypto's potential to become a store of value, while ethereum and Solana are mostly seen as blockchains that power smart contracts, or self-executing computer programs that eliminate middlemen.

(MORE TO FOLLOW) Dow Jones Newswires

July 02, 2025 16:36 ET (20:36 GMT)

MW A new crypto frontier is emerging on Wall -2-

To gauge investor interests in an ETF investing in Solana or other lesser-known cryptos, "the question is how much capital is there wanting exposure to these crypto assets that can't get it any other way than through an exchange-listed entity?" said Thorn. Investors could opt to buy crypto directly on exchanges such as Coinbase Global Inc. (COIN), he said, though it won't be as convenient for some investors as buying them from a traditional brokerage account.

-Frances Yue

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 02, 2025 16:36 ET (20:36 GMT)

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