The State Of Solana With Matthew Sigel
By Lightspeed
Published on 2025-01-21
Explore the latest developments in Solana's ecosystem, Van Eck's new On-Chain Economy ETF, and the impact of regulatory changes on the crypto market with industry expert Matthew Sigel.
Van Eck's New On-Chain Economy ETF
In a significant development for the cryptocurrency investment landscape, Van Eck has filed for a new ETF called the On-Chain Economy ETF. This actively managed fund aims to capitalize on the growing digital asset ecosystem by investing in both digital asset instruments and equities of companies advancing blockchain technology.
Matthew Sigel, head of digital assets research at Van Eck, explained the rationale behind this new offering: "The on-chain economy ETF would be our first actively managed ETF in the space, and it aims to make money by investing in what we're calling digital asset instruments." These instruments include crypto ETPs such as Van Eck's HODL Bitcoin ETF and E3 Ethereum ETF, as well as equities of companies involved in the digital transformation.
The timing of this filing is noteworthy, coming shortly after the 2024 U.S. presidential election. Sigel revealed that the change in administration has bolstered Van Eck's optimism about the cryptocurrency space, prompting a restart of their product development pipeline. This ETF filing can be seen as a strategic move to position Van Eck at the forefront of the evolving crypto investment landscape.
The Composition of the On-Chain Economy ETF
The proposed ETF will have a dual focus, combining investments in digital assets and related equities. On the digital asset side, it will include crypto ETPs that provide exposure to major cryptocurrencies like Bitcoin and Ethereum. This approach allows investors to gain exposure to the cryptocurrency market through regulated, traditional investment vehicles.
For the equity component, the ETF will target what Van Eck calls "digital transformation companies." These are publicly traded firms actively involved in the blockchain and cryptocurrency ecosystem. Examples include Bitcoin mining companies, data center operators, and other businesses providing goods and services to crypto projects.
This diversified approach aims to provide investors with broad exposure to the growth of the digital asset economy, mitigating some of the risks associated with direct cryptocurrency investments while still capturing potential upside.
Regulatory Landscape and IPO Potential
The filing of the On-Chain Economy ETF is not just a product launch; it's also a strategic bet on the changing regulatory environment in the United States. With the new administration expected to take a more crypto-friendly stance, Van Eck anticipates a more favorable climate for cryptocurrency-related financial products.
Sigel pointed out that this ETF could be seen as a "call option" on a potential surge in crypto-related IPOs. He explained, "We're pretty confident that the market cap in this space is going to grow a lot this year from appreciation of existing winners and, you know, new IPOs in the space."
The potential for more crypto companies to go public in the U.S. could significantly expand the universe of investable assets for the ETF. Sigel cited examples like Exodus, a crypto wallet company that recently uplisted to U.S. markets, and speculated that others like Galaxy Digital might follow suit.
Impact of Regulatory Changes on the Crypto Market
The change in administration is expected to have far-reaching effects on the cryptocurrency industry beyond just new investment products. Sigel anticipates a shift in regulatory approach that could benefit the entire ecosystem:
- Resubmission of Solana ETF: Van Eck plans to quickly refile their Solana ETF application, which was previously ignored by the SEC under the previous administration.
- Staking considerations: Discussions about staking Ethereum held in Van Eck's Ethereum ETF are expected to gain momentum.
- Onshore development: A more favorable regulatory environment could encourage more crypto projects to build in the U.S., potentially reversing the trend of declining crypto developer share in the country.
- Resolution of ongoing lawsuits: Sigel predicts that enforcement actions against companies like Coinbase are likely to be settled more quickly under the new administration.
These changes could collectively contribute to a more robust and innovative crypto ecosystem in the United States.
Market Outlook and Investment Strategy
Despite the optimism surrounding regulatory changes, Sigel maintains a measured outlook on the market. He notes that the crypto market has experienced its largest post-election altcoin correction ever, with a 35% pullback following new all-time highs.
However, Sigel views this correction as potentially setting the stage for the next leg of the bull market. He outlines a possible scenario where the market regains all-time highs in late Q1 2025, experiences a "sell in May" phenomenon, and then retests and potentially makes new highs in Q4.
This outlook informs Van Eck's investment strategy across their various crypto-focused products. Sigel mentions that they've adjusted their positions in response to market conditions:
- Reduced L1 positions: Van Eck has decreased their exposure to Layer 1 blockchains in some strategies.
- Increased DApp investments: They've increased positions in decentralized applications (DApps).
- Maintaining core positions: Solana remains a large and core position in their strategies, albeit at a lower allocation than in 2024.
This balanced approach reflects Van Eck's attempt to capitalize on broader market trends while maintaining exposure to key projects in the ecosystem.
The State of Solana in 2025
As one of the leading Layer 1 blockchains, Solana's performance and development are crucial indicators for the broader crypto market. Sigel provided insights into Solana's current state and potential challenges:
- Token Unlocks: A significant event on the horizon is the unlocking of Solana tokens from the FTX estate. Sigel estimates that about 1.4 billion SOL will unlock in March 2025, followed by monthly unlocks of about 110 million SOL for the next three years.
- Foundation Sales: There are reports of the Solana Foundation selling approximately 25 million SOL per month, though Sigel couldn't confirm this figure.
- Market Impact: While these unlocks and sales represent a substantial supply increase, Sigel believes that as long as Solana continues to gain market share in transactions, fees, and on-chain activity, investors are likely to look past these events.
- Comparative Performance: Sigel notes that Solana's revenue from applications is roughly equivalent to Ethereum's, but with a much narrower breadth of applications generating significant revenue.
MEV and Solana's Economics
Maximum Extractable Value (MEV) continues to be a significant factor in Solana's economics. Sigel describes it as a "necessary evil" that incentivizes stakeholders to arbitrage prices and maximize block space usage.
However, MEV on Solana has some unique characteristics:
- Larger Share: MEV represents a much larger percentage of Solana's economics compared to other chains like Ethereum.
- Centralization Concerns: The complexity of Solana's consensus mechanism has led to some centralization in stake distribution, with a small number of sophisticated actors exploiting MEV opportunities.
- App Economics: Solana apps tend to keep a higher percentage (60%+) of the economic value created compared to Ethereum apps, which could incentivize more developers to build on Solana in the long term.
While MEV presents challenges, it also contributes to Solana's high performance and attracts sophisticated financial stakeholders to the ecosystem.
Meme Coins and Wash Trading on Solana
The prevalence of meme coin activity on Solana has been a topic of discussion and criticism. Sigel provided some interesting data points on this issue:
- Meme Coin Revenue: At its peak in November, 34% of Solana's revenues were derived from meme coin activity, compared to about 7% for Ethereum.
- Historical Context: During the NFT craze on Ethereum in 2021, 20% of Ethereum's revenues came from NFTs, showing that such concentrated activity is not unique to Solana.
- Wash Trading: Sigel estimates that in October-November, 31% of meme coin volumes on Solana were wash trading. For comparison, 44% of Ethereum NFT trading in 2021 was estimated to be wash trading.
- Overall Impact: Approximately 14% of Solana's revenues came directly from wash trading, compared to 9% for Ethereum during its NFT peak.
While these figures might seem concerning, Sigel puts them in perspective by comparing the situation to Alibaba's IPO in 2014, where a significant portion of revenues were related to questionable practices. He argues that as long as these issues are disclosed and addressed over time, they shouldn't be overly concerning for the long-term health of the ecosystem.
Improvements and Challenges in the Solana Ecosystem
Sigel highlighted several areas where Solana has made progress and faces ongoing challenges:
Improvements:
- Data Transparency: Major progress has been made in improving data accessibility and reducing costs for data providers.
- App Economics: The high take rate for app makers on Solana (up to 80% in some cases) is seen as a strong draw for developers.
Ongoing Challenges:
- MEV Dominance: The large role of MEV in Solana's economics remains a point of discussion.
- Complexity: Solana's consensus design is still considered too complex for many builders to fully understand.
- Development Difficulty: Building on Solana is often described as "chewing glass," indicating persistent challenges for developers.
Despite these challenges, Sigel remains optimistic about Solana's future, citing its clear purpose, practical focus, and commitment to innovation as key strengths.
The Future of Crypto Payments and Real-World Applications
The podcast touched on the growing intersection between traditional finance and cryptocurrency, particularly in the payments space. Recent acquisitions, such as Stripe's purchase of Wyre for $1.1 billion and Moonpay's acquisition of Helio for $175 million, highlight the increasing interest in crypto payment solutions.
Sigel sees regulatory clarity as a key factor in expanding crypto payments adoption. He points to the potential approval of a Solana ETF as a signal that the regulatory winds are shifting, which could lead to broader acceptance of Solana-based stablecoins and payment solutions.
The discussion also touched on the transition from speculation to utility in the crypto space. While financial applications currently dominate revenue generation on Solana, Sigel notes that this infrastructure is necessary to support less speculative use cases in the future. He mentions investments in projects like Helium and Hivemapper as examples of "deep tech" applications being built on Solana, though their economic impact is not yet comparable to financial apps.
Van Eck Ventures and the Future of Crypto Investing
In an exciting development for the crypto venture capital space, Van Eck has launched a new venture arm called Van Eck Ventures. Led by Wyatt Lonergan, formerly of Circle Ventures, the fund is closing its first round of approximately $30 million, focusing on seed to Series A investments in the tokenized capital markets sector.
Sigel explains the thesis behind Van Eck Ventures: "The thesis is around tokenized capital markets. So that's broad, right? But kind of leading with stablecoin infrastructure where we have a project called Agora. And Superform was an investment there. That's like an RWA platform."
This venture arm complements Van Eck's existing crypto investment strategies, creating a full lifecycle from early-stage ventures to large-cap, buy-and-stake strategies for major L1 blockchains. This integrated approach allows for information sharing across different investment stages, potentially creating alpha for Van Eck's clients.
The Road Ahead for Solana and the Crypto Market
As the conversation wrapped up, Sigel shared his perspective on what success looks like for Solana and the broader crypto market in the coming years. His view is straightforward: it's about price appreciation and increased economic activity on open-source ledgers compared to permissioned systems.
Sigel emphasized the importance of these blockchain networks being viewed as money, capable of serving as collateral and stores of value. While he hopes to see more real-world activity and a broader distribution of value creation across various sectors (including gaming and "deep tech" projects), he acknowledges that success driven by overall market growth is also acceptable.
Looking ahead, Sigel sees promising developments in areas like AI agents, noting that the market structure for these projects appears more favorable than some of the high fully diluted value (FDV), low float tokens of the previous year. He views the trend towards fair launches and retail-oriented projects with less VC participation as a positive indicator for the ecosystem's health.
In conclusion, while challenges remain, the outlook for Solana and the broader crypto market in 2025 appears optimistic. With regulatory tailwinds, technological advancements, and growing institutional interest, the stage seems set for continued innovation and adoption in the cryptocurrency space.
Facts + Figures
- Van Eck has filed for a new On-Chain Economy ETF, their first actively managed ETF in the crypto space.
- The ETF will invest in digital asset instruments (crypto ETPs) and equities of digital transformation companies.
- At its peak, 34% of Solana's revenues were derived from meme coin activity, compared to about 7% for Ethereum.
- Approximately 14% of Solana's revenues came directly from wash trading, compared to 9% for Ethereum during its NFT peak.
- About 1.4 billion SOL will unlock in March 2025, followed by monthly unlocks of about 110 million SOL for the next three years.
- The Solana Foundation is reportedly selling approximately 25 million SOL per month.
- Solana apps tend to keep 60%+ of the economic value created, compared to a lower percentage for Ethereum apps.
- Van Eck Ventures, a new venture arm, is closing its first fund of approximately $30 million, focusing on seed to Series A investments.
- The crypto market experienced its largest post-election altcoin correction ever, with a 35% pullback following new all-time highs.
- Solana's revenue from applications is roughly equivalent to Ethereum's, but with a much narrower breadth of applications generating significant revenue.
- The U.S. has been losing share of crypto developers for all four years of the Biden administration, reaching an all-time low.
- Van Eck plans to quickly refile their Solana ETF application, which was previously ignored by the SEC under the previous administration.
- Token Terminal, a data provider, was able to reduce their monthly data costs for understanding Solana activity by 90% through innovation.
- In some cases, apps on Solana are taking up to 80% of the revenues that users are paying, which is much higher than on Ethereum.
- Van Eck's liquid token strategies look for projects with doxxed teams, on-chain products superior to traditional finance equivalents, and a path to generating real economics through fees.
Questions Answered
What is Van Eck's new On-Chain Economy ETF?
Van Eck's On-Chain Economy ETF is a newly filed, actively managed fund that aims to invest in both digital asset instruments and equities of companies advancing blockchain technology. It will include crypto ETPs like Van Eck's Bitcoin and Ethereum ETFs, as well as stocks of companies involved in the digital transformation, such as Bitcoin miners and data center operators. This ETF is designed to provide broad exposure to the growth of the digital asset economy while mitigating some of the risks associated with direct cryptocurrency investments.
How might the change in U.S. administration affect the crypto market?
The change in U.S. administration is expected to create a more favorable regulatory environment for cryptocurrencies. This could lead to faster approval of crypto-related financial products, such as ETFs, and encourage more crypto projects to build in the U.S. It may also result in quicker resolution of ongoing enforcement actions against crypto companies. Additionally, there's potential for more crypto-related IPOs, which could expand the universe of investable assets in the sector. Overall, these changes are anticipated to foster innovation and growth in the U.S. crypto ecosystem.
What are the main challenges facing Solana in 2025?
Solana faces several challenges in 2025, including significant token unlocks from the FTX estate (about 1.4 billion SOL in March 2025, followed by monthly unlocks), reported foundation sales of approximately 25 million SOL per month, and the dominance of MEV in its economic model. Additionally, Solana's consensus design is considered too complex for many builders to fully understand, and development on the platform is often described as difficult. Despite these challenges, Solana continues to show strong performance in terms of transaction volume and fees, and its practical focus and commitment to innovation are seen as key strengths.
How does MEV impact Solana's economics?
Maximum Extractable Value (MEV) plays a significant role in Solana's economics, representing a larger share of value compared to other chains like Ethereum. While it's described as a "necessary evil" that incentivizes stakeholders to arbitrage prices and maximize block space usage, it also presents challenges. The complexity of exploiting MEV on Solana has led to some centralization in stake distribution. However, ME also contributes to Solana's high performance and attracts sophisticated financial stakeholders to the ecosystem. Importantly, Solana apps tend to keep a higher percentage (60%+) of the economic value created compared to Ethereum apps, which could incentivize more developers to build on the platform in the long term.
What is Van Eck Ventures and what is its investment focus?
Van Eck Ventures is a new venture arm launched by Van Eck, focusing on early-stage investments in the crypto and blockchain space. Led by Wyatt Lonergan, formerly of Circle Ventures, the fund is closing its first round of approximately $30 million. It will focus on seed to Series A investments in the tokenized capital markets sector, with a particular emphasis on stablecoin infrastructure. This venture arm complements Van Eck's existing crypto investment strategies, creating a full lifecycle from early-stage ventures to large-cap, buy-and-stake strategies for major L1 blockchains. The integrated approach allows for information sharing across different investment stages, potentially creating alpha for Van Eck's clients.
How significant is meme coin activity on Solana compared to other chains?
Meme coin activity has been a significant part of Solana's ecosystem. At its peak in November, 34% of Solana's revenues were derived from meme coin activity, compared to about 7% for Ethereum. However, this concentration of activity is not unique to Solana. During the NFT craze on Ethereum in 2021, 20% of Ethereum's revenues came from NFTs. In terms of wash trading, approximately 31% of meme coin volumes on Solana were estimated to be wash trades, compared to 44% of Ethereum NFT trading in 2021. While these figures might seem concerning, they are seen as part of the ecosystem's growth and maturation process, similar to challenges faced by traditional tech companies during their early stages of development.
What improvements has Solana made in recent months?
Solana has made significant progress in several areas. Notably, there have been major improvements in data transparency, with data providers able to reduce their costs for understanding Solana activity by up to 90% through innovation. This enhanced data accessibility is crucial for researchers, investors, and developers. Additionally, the high take rate for app makers on Solana (up to 80% in some cases) is seen as a strong draw for developers, potentially leading to more innovative applications being built on the platform. Despite ongoing challenges, these improvements demonstrate Solana's commitment to addressing key issues and enhancing its ecosystem.
How does Van Eck approach investing in crypto projects?
Van Eck employs a multi-faceted approach to investing in crypto projects. For their liquid token strategies, they look for projects with doxxed teams (publicly known developers), on-chain products that are superior to their traditional finance equivalents, and a clear path to generating real economics through fees. Position sizing is based on the project's level of development and economic potential. Large positions (10% or more) are allocated to projects with established fundamentals, while smaller positions (1-3%) might be taken in more speculative projects with strong teams and visions but unproven economics. This approach allows Van Eck to balance potential high-growth opportunities with more established projects in the crypto space.
What is the outlook for crypto payments and real-world applications?
The outlook for crypto payments and real-world applications is increasingly positive, with growing interest from traditional finance players. Recent acquisitions, such as Stripe's purchase of Wyre and Moonpay's acquisition of Helio, highlight the potential in this space. Regulatory clarity is seen as a key factor in expanding crypto payments adoption. While financial applications currently dominate revenue generation on blockchains like Solana, this infrastructure is viewed as necessary to support less speculative use cases in the future. Projects in areas like IoT (Internet of Things) and mapping are being developed, though their economic impact is not yet comparable to financial apps. The industry is seen as transitioning from a speculation-driven phase to one focused more on utility and real-world applications.
How does Solana compare to Ethereum in terms of app revenue and diversity?
Solana's revenue from applications is roughly equivalent to Ethereum's, which is a significant achievement given Ethereum's longer history and larger ecosystem. However, there's a notable difference in the diversity of revenue-generating applications. On Ethereum, there are about 40 different projects generating meaningful levels of revenue, while on Solana, this number is closer to 10. The revenue on Solana is more concentrated in a handful of DeFi-focused, MEV-focused, or meme coin-focused apps. This concentration could be seen as both a strength (showing the efficiency of key applications) and a potential area for growth (as the ecosystem diversifies). The higher take rate for app developers on Solana (up to 80% in some cases, compared to lower rates on Ethereum) is seen as a potential driver for future application development and ecosystem expansion.
On this page
- Van Eck's New On-Chain Economy ETF
- The Composition of the On-Chain Economy ETF
- Regulatory Landscape and IPO Potential
- Impact of Regulatory Changes on the Crypto Market
- Market Outlook and Investment Strategy
- The State of Solana in 2025
- MEV and Solana's Economics
- Meme Coins and Wash Trading on Solana
- Improvements and Challenges in the Solana Ecosystem
- The Future of Crypto Payments and Real-World Applications
- Van Eck Ventures and the Future of Crypto Investing
- The Road Ahead for Solana and the Crypto Market
- Facts + Figures
-
Questions Answered
- What is Van Eck's new On-Chain Economy ETF?
- How might the change in U.S. administration affect the crypto market?
- What are the main challenges facing Solana in 2025?
- How does MEV impact Solana's economics?
- What is Van Eck Ventures and what is its investment focus?
- How significant is meme coin activity on Solana compared to other chains?
- What improvements has Solana made in recent months?
- How does Van Eck approach investing in crypto projects?
- What is the outlook for crypto payments and real-world applications?
- How does Solana compare to Ethereum in terms of app revenue and diversity?
Related Content
The LeBron of Solana - Ansem
Crypto trader Ansem shares insights on Solana's explosive growth, the future of Ethereum, and predictions for the 2024 bull market in this in-depth interview.
Inside the Solana Foundation with Austin Federa
Explore the Solana Foundation's strategy, ecosystem development, and future outlook with Head of Strategy Austin Federa in this insightful podcast interview.
The State Of Solana In 2024 | Austin Federa
Explore the current state of Solana with Austin Federa, discussing economic security, meme coins, network growth, and the future of blockchain technology.
Why Solana & Ethereum Still Need To Compete | Weekly Roundup
Explore the latest in crypto: Ethereum's Beam Chain, Solana's resilience, Bitcoin's ATH, and regulatory challenges in this weekly roundup.
Future of Media ft. eDAO
Explore the future of media with eDAO founders as they delve into NFTs, music monetization, and the evolving entertainment industry in the Web3 space.
The Libra Impact On Solana | Weekly Roundup
Explore the controversial Libra token launch, its impact on Solana, and the broader implications for meme coins and crypto market integrity.
Will A Solana ETF Get Approved? | Matthew Sigel
VanEck's Head of Digital Assets Research discusses Solana ETF filing, crypto market dynamics, and the future of blockchain technology in finance.
Solana Changelog Oct 30th
Explore the latest Solana developments including Old Faithful RPC on Filecoin, verified builds in Explorer, and a new transaction size specification
Breakpoint 2023: Creator Economy on Solana
Exploring the rising creator economy on Solana with a focus on on-chain monetization and relationships.
UX Inflection Point with Meso Network
Explore the future of crypto UX with Meso Network's Ben, discussing account abstraction, pass keys, and the path to onboarding the next billion users.
Jito and the Future of Solana w/ Lucas Bruder | ep. 2
Lucas Bruder discusses Jito's role in Solana's ecosystem, liquid staking innovations, and the network's recent outage in this insightful podcast.
The Future of NFTs with Zedd of Magic Eden
Explore how Solana economic zones are revolutionizing global finance, empowering communities, and driving adoption in developing nations.
Breakpoint 2023: Building Beyond Product
Exploring the importance of building a cohesive team culture, legal compliance, and strong community connections in the crypto marketplace.
The Return Of Meme Coin Mania | Mert Mumtaz, Dan Smith
Explore the resurgence of meme coins, Solana's MEV challenges, and Ethereum's scaling solutions in this in-depth analysis of the latest crypto trends.
The One With Kollan from MetaDAO | ep. 4
Explore insights from Kollan on trading history, market making, and the future of decentralized governance with MetaDAO on Solana.
- Our Validator
- Borrow / Lend
- Liquidity Pools
- Token Swaps & Trading
- Yield Farming
- Solana Explained
- Is Solana an Ethereum killer?
- Transaction Fees
- Why Is Solana Going Up?
- Solana's History
- What makes Solana Unique?
- What Is Solana?
- How To Buy Solana
- Solana's Best Projects: Dapps, Defi & NFTs
- Choosing The Best Solana Validator
- Staking Rewards Calculator
- Liquid Staking
- Can You Mine Solana?
- Solana Staking Pools
- Staking On Solana
- How To Unstake Solana
- How To Unstake Solana
- How validators earn
- Best Wallets For Solana