Kaiko Research said on May 27 that the approval of a spot Ethereum ETF is a positive sign for the digital asset's long-term growth, despite possible short-term headwinds.
Kaiko reported that the approval clears up much of the regulatory uncertainty surrounding Ethereum’s classification as an asset class.
Will Kai, head of indexes at Kaiko, said the approval means the SEC is implicitly treating ETH as a commodity rather than a security.
“[The approvals have] It will have a significant, and likely positive, impact on how similar tokens are regulated in the United States…”
Contrary to initial expectations, the SEC approved the ETF’s 19b-4 filing on May 23. The SEC has yet to approve the S-1 order. The Spot Ethereum ETF is expected to launch in the coming weeks or months.
Grayscale is a possible leak
Kaiko believes that despite the optimistic outlook regarding regulatory changes, Grayscale’s ETHE fund may experience outflows, which could lead to selling pressure on ETH when the new fund begins trading.
It read:
“The impact of ETHE redemption on the overall market remains unclear.”
Grayscale's ETHE currently has $11 billion in assets under management (AUM), and Kaiko expects the fund to experience average daily outflows of $110 million once it begins trading as an ETF.
By comparison, Grayscale's Bitcoin fund, GBTC, saw outflows of $6.5 billion, or 23% of its assets under management, in its first month of trading as an ETF.
Additionally, inflows into other ETFs offset or exceeded GBTC outflows by the end of January.
Hong Kong ETFs
Kaico also took note of the Hong Kong ETH ETF, saying the overseas fund's “lackluster” launch indicates further uncertainty about how ETHE redemptions will affect the market.
According to separate data from Far Side, the Hong Kong Spot ETH ETF has seen net outflows of $4.4 million since its launch in early May.
Finally, Kaiko commented on the centralized exchange data: ETH market depth is nearly $226 million, about 42% below the average level before FTX was introduced. ETH is only 40% concentrated on US exchanges, down from 50% in early 2023.
