The First Solana ETF Just Launched. Should You Buy It?

With the launch of the Bitwise Solana Staking ETF (NYSEMKT: BSOL) on Oct. 28, for the very first time there's now an exchange-traded fund (ETF) that offers investors with traditional brokerage and retirement accounts direct exposure to Solana (CRYPTO: SOL) as well as the ability to stake it to harvest a yield. This is perhaps the single biggest catalyst for Solana in the current market cycle, and it marks a big step toward the asset becoming a mainstream investment rather than "just" a leading cryptocurrency.

But should you buy it? Let's examine this new ETF a bit more closely and understand what it can do for you and what it costs to get some clarity on that question.

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What the ETF actually offers

As you probably already know, an ETF is a security that trades on a stock exchange and seeks to track an underlying asset or basket of assets based on a specific set of rules determined by the ETF's issuer. Here, the asset is SOL, the native token of the Solana network.

The Solana ETF's primary objective is thus to give investors exposure to the coin's price. During the past 12 months, Solana's price fell about 3% (as of Nov. 4), meaning that it significantly underperformed the stock market, and lagged way behind the crypto sector's biggest asset, Bitcoin. Still, new capital inflows generated by the ETF could make the next 12 months much better for holders.

The ETF's secondary objective is to give investors the ability to generate a yield from their Solana holdings through staking. As a reminder, staking is the network's process of delegating Solana to network validators in return for rewards. Presently, Bitwise Asset Management, the ETF's issuer, says that on an annual basis, many investors are able to earn a yield of about 7% from staking their holdings, so this could potentially be a pretty good income-generating asset for investors who wouldn't usually be interested in crypto.

The fund's expense ratio is 0.20%, with a three-month waiver on the first $1 billion in assets starting at launch. As far as ETF expenses tend to go, that's on the low side.

Zooming out, the ETF is arriving on the scene alongside the broader regulatory clearance for spot Solana ETFs in the U.S., opening the door to mainstream access via this fund as well as other vehicles. The first few days of trading suggest healthy initial interest in the fund, and overall, a strong debut for the category; $197 million flowed in between Oct. 28 and Oct. 31, which is quite impressive.

Is it worth buying?

If you want Solana exposure inside a brokerage or retirement account with ordinary tax documents and without learning anything about digital wallets, crypto exchanges, staking services, or self-custody, the Bitwise Solana ETF is designed specifically for you. It bundles ownership, staking, and custody into a simple security you can buy with dollar-cost averaging while charging a modest fee. Owning the ETF will ensure that as Solana itself continues to grow and make inroads into the growth segments of the near future, like tokenized real-world asset management, you will get upside for as long as there's upside to capture.

On the other hand, if you already self-custody your crypto, holding the crypto directly is probably still the more appealing option. You will have control over your staking validator or liquid staking token, potentially be able to optimize for yield, and avoid incurring an ongoing management feee, not to mention maintaining direct control over your coins and allowing them to be easily allocated elsewhere on a whim. However, direct ownership comes with operational risks, like the need to manage security for yourself.

But what about the Solana investment thesis itself?

It's improved by the launch of the ETF. With more brokerage and retirement money flowing into the crypto via public markets, the price is now more likely to rise for as long as that trend lasts. Assuming that ETF access brings in steady net inflows, which in the long run it likely will, it might improve liquidity depth across the network's ecosystem and reinforce Solana's position as a high-throughput, low-fee chain for decentralized app (dApp) developers and enterprises.

Thus, the verdict is that for mainstream and long-term oriented investors who want Solana exposure without any hassle, the Bitwise Solana ETF is a good way to do that, and it's worth buying. Of course, if the coin itself goes down, the ETF will too, so keep in mind that the main feature it's offering you is convenience, not any additional performance or reduction in the risks of buying Solana.

Alex Carchidi has positions in Bitcoin and Solana. The Motley Fool has positions in and recommends Bitcoin and Solana. The Motley Fool has a disclosure policy.