ETFs filed, Solana gonna moon? - July 2024 (#26)

Hey all! Your dude Brent will cover two things today. First what do the Solana ETFs that were just filed mean for the price? Second, is this new Fannie Mae zero down program a good thing for housing? It’s about to get spicy. Buckle up!

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TLDR; WHEN the SOL ETFs get approved it will likely dramatically increase the price of SOLANA. The new Fannie Mae no down payment program will end up making housing more expensive…

So first let’s talk about how both VanEck and Ark Invest filed for ETFs with the SEC… and why you should care. Although this was a fairly big deal, it was just a matter of time before it happened. With Ethereum having an ETF filed a while back, it seemed pretty inevitable.

ETFs are just funds that hold assets. You can buy ETFs that hold gold, oil, stocks, bonds, and even K-POP. So the idea is that by buying into an ETF, you can make money if another thing or things go up. Just like how buying gold involves annoying things like shipping and storing, ETFs making buying things that are usually harder to buy, easier. 

A Solana ETF would enable anyone with a brokerage account to invest in Solana. The beauty of that is that it would allow institutional investors to invest as well (hedge funds, family offices, pension funds, etc). Right now institutional investors don’t really have a good way to do so and an ETF would change that. As such, the theory is that ETFs could lead to BIG MONEY coming into Solana.

It’s important to remember that filing for an ETF essentially means you are asking for permission from the SEC. It took Bitcoin a full 10 years to get an ETF. However Bitcoin getting an ETF paved the way for other crypto assets to get one. It could be a while before Solana ETF actually launches, but with recent regulatory developments and the progress of the Ethereum ETF I’d say it’s close to inevitable it gets approved. Impossible to know exactly when though…

So when it finally does happen, what will the effect be on the price of Solana? Well… as always it’s tough to say, but my guess is… BIG. REALLY BIG. All of the Solana in existence as of this writing combined are worth just 60 billion. That might seem like a lot, but it’s really chump change in the grand scheme of things. For some perspective all of the Ethereum is worth about 400 billion and Bitcoin is worth about 1.2 trillion.

One of my favorite analysts and Youtubers (Guy isn’t just any Youtuber, he’s Wharton grad and a former currency trader) did a deep dive on this and his takeaways are WILD. He thinks 15 billion could easily come into Solana. For perspective Bitcoin ETFs have brought in over 70 billion. So if 15 billion comes in, his base case is a Solana price of $799!!! I personally agree with much of his argument and think he’s sandbagged pretty heavily. I’d encourage you to watch the video, do your own research, and make your own conclusions.

Next, I had a great question about Fannie Mae’s new zero down home loan program. It allows borrowers to take out a second mortgage on a house for the down payment. So, sounds good right? Not have to pay any down payment? At first glance, this sounds like a great idea for all those first time buyers who are having trouble scraping together a down payment. However, just looking back at history I have some concerns.

One thing you have to understand is that, by and large, virtually any program that makes a product more affordable ends up causing the price to go up. Why? Because when a product is easier to afford, more people buy it! So demand goes up, raising the price. So while this program will help a few borrowers get into a home, it will raise prices in general putting home ownership further out of reach long term.

Another thing to note is that higher prices, while putting things farther out of reach for most people, are less of a hindrance for large corporations to buy. Let me explain something. Corporations and high net worth individuals do not borrow at the same rates you do. In fact, they borrow money a lot CHEAPER than you do. Without getting technical, just know that during COVID, there were companies borrowing at just .25%, yes that’s a quarter of a percent!

Understand this, the higher prices go, the more people have to rent. The more people that rent, the greater demand there is for rent and rent prices go up. That means higher return on investment for a corporation to buy housing. If a corporation can buy a bunch of single family homes and borrow at 2% and can make 4% on their investment they will do that all day long.

In conclusion, while the Fannie Mae program will benefit some, I think it will be to the detriment of many if widely adopted. My personal opinion is that the right way to bring housing prices down is to reduce regulation and provide incentives for entry level housing to be built. Also, just remember that before the ‘08 crash zero down loans were very popular, and it was one of MANY reasons that housing prices went stratospheric to the point nobody could afford them and prices had to come down. I hear echos of the past when I read about zero down loans like this one coming back…

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