OSOL: Your gateway to Solana

Osprey Solana Trust (OTC:OSOL) was created to give investors direct access to Solana (SOL-USD), the native token of the Solana network. Through the pure allocation of all its assets to Solana The Trust seeks to track Solana’s performance, without any administrative or maintenance costs. To help investors understand why OSOL could be a useful addition to their investment portfolios, this article will examine the structure, benefits, and potential risks associated with the product.

OSOL has been given a HOLD rating due to the market condition and design of the Trust. For investors, OSOL provides an easy way to participate in Solana’s expansion and innovation without having to deal with the hassles of direct ownership. However, OSOL is a very expensive way to get Solana exposure due to the 2.5% management fee and hefty fees The premium it is currently trading at; Additionally, risks are further heightened by regulatory uncertainty and natural fluctuations in the Solana market.

Fund concept

The primary goal of the OSOL Trust is to replicate the performance of Solana after deducting any related costs. This allows investors to benefit from Solana’s potential growth and technological innovations without having to deal with the hassle of storing wallets or private keys. By simplifying investment procedures, OSOL provides a simple and easy way to engage with the rapidly expanding digital asset market.

If not, the main advantage of OSOL is its accessibility. It is relatively easy for investors to buy shares in OSOL. The secondary market for OSOL is available to all investors, however, direct shares of the Fund are only available to accredited investors in private placements. This means they can hold OSOL through their existing brokerage accounts or individual retirement plans (IRAs). A portfolio of digital assets held through traditional financial means (i.e. trusts and ETFs) can be easily diversified with OSOL as a counterpart to the more popular investments in exposure to Ethereum or Bitcoin.

The Osprey Solana Trust places a high priority on security and transparency. Trust ensures that investors receive accurate and transparent information about its performance and operations by submitting quarterly financial statements and undergoing annual audits, which we will delve into later in the article (First Quarter 2024 Report). To further protect its assets, OSOL uses strict preservation and cold storage protocols. Investors can feel secure knowing that their funds are well protected thanks to these precautions, which include advanced security systems aimed at warding off theft and hacking. This becomes especially important for OSOLs as they are actively holding Solana, which means they are exposed to additional risk that would not exist if they were just holding Solana.

Why Solana?

Now that we have a better basic understanding of what OSOL is, we’ll look at why Solana is an interesting asset to get exposure to. This thesis builds on my previous article on the future of Solana.

To summarize, Solana created a positive feedback loop with lower costs, enabling users to flow with micropayments, causing an uptick in DAPP leading to more users coming in as evidenced by the number of active addresses. This in turn puts a burden on the network, forcing Solana to become stronger or die. This battle test comes at a pivotal moment for Solana, as it will be integrated with Stripe’s payment system, seamlessly bringing web3 payments to web2 e-commerce stores. This is possible thanks to Solana’s unique method of requesting transactions, which significantly improves transaction speed and reduces costs. This efficiency positions Solana as a strong competitor in the blockchain space, increasing interest and investment in its token.

Fund structure and holdings

Diving into the Osprey Fund’s Q1 2024 report, the OSOL Fund held 195,375.97 Solana worth $36,394,636 as of March 31, 2024, versus 194,403.40 Solana worth $20,377,364 at the end of December 2023. Despite the modest 0.5% increase in Solana , he maintained + The 80% rise in value is the result of increased stake rewards and a significant increase in SOL’s market price.

As of the most recent report, the Trust’s assets were almost entirely staked, with $36,297,409 of Solana representing 99.7% of Solana owned. By leveraging SOL’s staking features, OSOL is able to produce additional revenue through staking rewards, increasing profits with an additional return of approximately 6% per year.

Investment objective

The main goal of the Osprey Solana Trust is to track the price of Solana in order to give investors the opportunity to benefit from the expansion and growth of Solana’s blockchain ecosystem. It also hopes to provide a simple investment tool that fits into the ever-changing world of digital assets.

OSOL, as of May 20, 2024, carries a market price of $269.39 and an NAV of $89.47. With each share representing 0.477 Sol, the fund’s assets under management amount to US$36,765,606. Coinbase, as the leading and trusted counterparty, serves as custodian. The fund charges a 2.5% management fee and does not currently implement any type of stock redemption program, but rather directs investors to the second-hand market.

Since OSOL is relatively new in the market, there is not a lot of historical data that the general public can easily access. I’ve put together a detailed guide to the outrageous premium OSOL is currently trading at (something I couldn’t find easily accessible historical data).

The table shows the relative value of OSOL and Solana. Given Solana’s current price per share of OSOL of 0.477, as documented on the Osprey Funds website, and a trading price of $178 and $252 for Solana and OSOL respectively, we can infer a hefty premium of 297% in the secondary market. If we then include the 2.5% management fee on top of that premium, OSOL becomes a steep way to get the Solana experience.

Risks and considerations

Investors who buy OSOL are taking a risk, since the cryptocurrency market is inherently volatile. Technological advances, shifts in regulations, and market situations can have a significant impact on the price of Solana. The Fund’s net asset value and market price may fluctuate significantly as a result of this volatility, which may have an impact on overall investment results. Furthermore, a 2.5% management fee is charged by The Trust, which will have an impact on overall returns. Fund management expenses, such as custody, administration and audit services, are covered by these fees. Investors should consider the costs and benefits of fees, even though they provide ease and security. The Trust trading at a huge premium should also be studied and rationalized to determine whether it is worth paying for, given its ease of valuation and regulatory compliance. Another consideration is the Coinbase custody risk that OSOL faces due to the nature of the cryptocurrency fund. Although it is unlikely that a private key hack or similar hack would occur that could cause huge losses to investors.

Finally, the regulatory environment is constantly changing. Amendments to the regulations may have an impact on the Fund’s operations and performance. Changes in regulations may have an impact on the taxation, trading or storage of cryptocurrencies, which may have an impact on investor sentiment and market dynamics. It is essential that investors remain informed of any regulatory changes that may occur and take into account the potential impact on their investments in OSOL.

Conclusion

OSOL serves both individual and institutional investors by simplifying access to Solana and offering a relatively safe investment tool. Even if the volatility and regulatory landscape of cryptocurrencies carries some risks, OSOL is an interesting option for investors wanting to diversify into digital assets, due to its high potential. However, given the expensive management fees and high premiums, I highly recommend investing in Solana rather than investing in OSOL. However, with the great potential that Solana has, I cannot comfortably recommend a sell, with a hold rating finalized for now.

Editor’s Note: This article discusses one or more securities that are not traded on a major U.S. exchange. Please be aware of the risks associated with these stocks.