Summary The SSK REX-Osprey SOL + Staking ETF (SSK) offers exposure to Solana (SOL) and monthly dividends from staking rewards through diversified mechanisms. SSK utilizes CoinShares’ staked-SOL ETP and JitoSOL’s liquid staking, balancing operational simplicity, security, and liquidity for optimal yield generation. Compared to peers, SSK leads in dividend yield (2.07%) for monthly income seekers, though its higher expense ratio and short track record warrant consideration. Current Solana market weakness is seen as a buying opportunity; recommend accumulating SSK during pullbacks for medium-term upside, with prudent risk management. Introduction The SSK REX-Osprey SOL + Staking ETF ( SSK ), is an option for those seeking exposure to the Solana cryptocurrency and at the same time obtain monthly dividends derived from staking. Next, the main thread of the article will be to show in such a way that the reader understands what staking is and how the fund generates cash to distribute monthly through this methodology. Similarly, we will compare it with other market options and we will finish by analyzing the current correction phase. Holdings: Know What You Own SSK Fund Website Currently the fund has three Solana formats in its portfolio: firstly, 53.15% are holdings of the currency, 43.86% correspond to CoinShares which are acquired shares of CoinShares Physical Staked Solana ETP (SLNC) , 5.16% correspond to First American Government Obligs and finally, the fourth way (2.85%) is LSD (Liquid Staking Derivative) from JitoSOL. This is important because the fund has 3 different ways to obtain returns through staking. But, before delving into how it is generated, let's see what staking is. Staking & Validators If you are not familiar with the blockchain world and without entering into technicalities or vocabulary “on-chain” staking consists of a simple way, to deposit an asset for a flexible (can be withdrawn at any time) or fixed term (there is a commitment of time for which it must remain deposited) and in return, receive an interest receive interest in the same asset (i.e., Petar deposits 10 solanas on Platform B and commits to maintain them for two years, in exchange, he receives X% of solanas Y every time). Such operations are very common in the DeFi industry. As additional information, the concept of staking was born with networks with protocol PoS (Proof Of Stake) in which its main characteristic is that validators, responsible for processing transactions and critical part in the security and operation of a blockchain, have the obligation or requirement to deposit for a period of time Y (renewable) an X amount of the native cryptocurrency in staking to be able to exercise their functions. However, it remarkable to highlight an important nuance: this total amount X is not only the validator’s own stake and it also includes delegated stake, but it (the “delegated part”) must be added and this is where portfolio management becomes critical: it hinges on the routes the fund takes to extract yield from SOL. Depending on the setup, the manager may select validators manually or rely on an automated selection/rebalancing mechanism, but we’ll discuss this process later. In reward for the operational work of validating and processing transactions and for locking their coins/tokens, they receive a certain amount of the native currency for each transaction processed. Add that not only does this type of deposits exist, but in addition to the staking of validators, within each blockchain protocol, other ways of staking, lending, farming, liquid staking, etc. have been developed. In what is known as the world of decentralized finance: DeFi. Without going too far into technicalities, delegation (which the fund does with part of its SOL) is a mechanism through which any entity that has solanas in its possession can interact with this program to participate in the staking, as if it were another validator. This is what the vehicle does directly with 2.85% of its total assets and indirectly with 43.86% (since CoinShares runs its own delegation mechanisms). In this way, validators also compete with each other to provide attractive conditions for raising capital. Here I leave you a list of the main pools of liquidity by TVL (Total Value Lock), where you can see that Jito is the largest and most liquid. List of pools by market cap : Solana Protocol Ratings by TVL (DefiLlama) Now that we have a better understanding about what staking is and also the figure of the validator, let's continue to delve into the ways through which the ETF seeks to generate a monthly dividend. Although we have previously described, there would be three ways in which it could generate the stake, we will only describe two ways since two of them are integrated and this is how we will treat them. 1) CoinShares Physical Staked Solana At the moment, the vehicle has in its holdings almost 43% of shares in the ETP of Solana de CoinShares. Here the operation is simple, CoinShares offers a fixed 3% per year that distributes daily in exchange for keeping all the extra returns and applying a management fee of 0%. In this way, each day the number of shares held by the fund is the same and there is a daily increase in the Coin Entitlement ( CE ), that is, the amount of SOL backed by securities increases. This approach is a straightforward way to secure a 3% distribution with low operational burden, especially when the issuer does not charge any management fee. You give up some of the potential performance you might otherwise get in exchange for simplifying operational management and reducing risk (uncertainty). 2) Solana , LSD (Liquid Staking Derivative) of JitoSOL & Native Staking In its prospectus , it is stated that the fund does not have the permissions to be able to make any type of on-chain operation with its holdings. In this way, the operation is limited to: Buy SOL Buy SOL ETPs/ETFs Execute Native Staking: delegate directly to validators Execute Liquid Staking via: Multi-validator Per-validator Likewise, it cannot access all types of liquid staking that exist (point 4) and therefore these types of operations are limited to multi-validator and pools per validator (aggregators) liquidity pools. So why do we put the solanas part together with the LSD holdings? Because really, LSD is one of the ways that the fund has to move the solanas to generate passive returns. Therefore, solanas are the way to access this type of operations and generate rewards that are transformed into dividends. Currently the fund is using the second (described in the previous section) and the fourth multi-validator way, to generate performance. However, although we would like to describe and delve into each of the ways, the objective of this article is to understand in the simplest way the mechanisms and risks associated with these operations. That is why we will make a brief general comment and we will rely on a more visual comparative table that we will also comment on. Staking Protocols Comparison (Node Analytica) In any of the three ways (the fourth grouping two sub-tracks), the fund can access these staking services. In the table, each column refers to each path to generate passive revenue, while each row is a criterion (to assess). Likewise, the aspects have been categorized using a simple rule from 1 to 3 being 3 the best (green) and 1 the worst (red), for a more visual comparison. In this way, the color of the last two rows of the table is based on the sum of the values. However, the penultimate row also adds a weighting component on the aspects based on the interests of the fund, giving greater weight to liquidity and ease in operational management. Currently it is using the Multi-Validator LST, which from our point of view is the best option for the fund because it simplifies operational management, the liquidity of the position is high and the mechanism automatically rebalances internally to consistently provide the best available conditions and although theoretically it does not keep in possession solanas, the synthetic they receive as a counterpart is safe and very liquid. Through the Native Staking route, it improves mainly the security and diversification potential but with a heavier operation, while the Per-Validator LST route improves mainly on the liquidity part but not too much with respect to the Multi-Validator. SSK ETF vs Others SSK ETF Profile (Seeking Alpha) Compared to other options such as SOLZ, GSOL or BSOL, SSK ranks high by expense ratio at 0.75% vs 0.20% of BSOL or 0.00% of GSOL (in the future it will be 0.35%) and only below SOLZ which charges a fee of 0.95%. If you are not seeking recurring distributions/income, today GSOL and BSOL are positioned as the most competitive options. SSK vs SOLZ Dividends (Seeking Alpha) SSK vs Others Dividend Yield (Seeking Alpha) However, in the event that in addition to being exposed to the cryptocurrency SOLANA wants to receive a monthly income for it, SSK is the winning option with a higher dividend yield of 2.07% vs 1.03% from SOLZ. However, it should be noted that SSK has only only ~3 months of history, so the trailing 12-month (TTM) distribution rate may be under or overstated. As a final note, in both cases the distribution is not guaranteed and they ensure that they can vary significantly month to month and be equal to zero. It is also important to note that SOLZ is futures-based, whereas SSK buys spot SOL, which reduces financing costs and improves NAV formation/price discovery. Solana Technicals Solana Price Weekly (Seeking Alpha) On the top graph, we have Solana's performance on a weekly basis. October has been a particularly bearish month for the entire crypto ecosystem. the question we ask is whether this correction is going to continue or the market is capitulating. The shaded area 160$-140$ approx. has been an area that has served both resistance and support. Last week's candle pierced with force the average of 50 sessions and exceeded the area of interest indicated but leaving a long upper wick, a sweep of liquidity that gives us a first sign that the liquidity sweep of this correction may be near and beginning its formation. Solana Price Weekly Zoom (Seeking Alpha) For the time being, the upward trend since April lows would remain active with highs and lows higher than before. Having said that, in our opinion we believe that the market is capitulating and a bottom may be forming, therefore we do not expect falls greater than 5%-10% (subtracting the support zone) in the short term to consolidate and gain momentum to recover the levels above the average of 50 sessions and continue with the upward movement. In this article , which we did on the 2× leveraged ETF from the most fundamental on-chain point of view (useful for a medium/long term view) we comment on the good on-chain momentum of the Solana network but that the entry should be cautious and with a good risk management. And in one of the conversations, we gave our opinion that it was better to wait and watch to find confirmations of exhaustion in the corrective movement and volatility in the short term to look for better entry opportunities. Conclusion The managers of SSK are performing good operational management in terms of seeking passive returns on assets. The decision to use the Jito platform that corresponds to the best rated path in our analysis along with the safety and simplicity of securing 3% via CoinShares’ staked-SOL ETP (SLNC), sounds prudent and well-reasoned. It should be remembered that the fund has no obligation to distribute these dividends and that these distributions come exclusively from staking rewards, which the fund converts to USD by selling a portion of SOL. However, if the price of SOL falls , the fund would have the same amount of currencies but with a lower valuation so to maintain the same dynamics in the volume of payments received, they would be obliged to sell more solanas, which reduces the NAV and part of the payment can materialize in the form of ROC. The expense ratios comparative to other similar products (with yield dividends) are lower, they have a higher volume and being the same exposure, the attractiveness is remarkable. As for Solana, we recently conducted an analysis of another ETF in which we valued the momentum of the cryptocurrency and our criterion has not yet changed: the macro uptrend remains intact, no signs of change have yet been given and we maintain the prospect of tactical buy in reversals + hold in a 5-6 month horizon. Currently, we’re in a pullback that can be used to add on weakness, that's why we recommend buying SSK as we see actual value as an opportunity to accumulate more SOL at a “discount” and no worries if price falls between another 5-10%, as it is normal to retest support areas and gain energy for the next impulse. As always, manage risk when trading/investing. Thank you very much for your time.
