Kaiko Research indicated on May 27 that the approval of spot Ethereum ETFs marks a positive development for the digital asset's long-term growth, despite potential short-term challenges.

According to Kaiko’s analysis, the approval has significantly reduced regulatory uncertainty surrounding Ethereum's classification as an asset class. Will Cai, Head of Indices at Kaiko, mentioned that the SEC's approval implies Ethereum is being treated as a commodity rather than a security. He added:

"The approvals have significant and likely positive implications for how similar tokens will be regulated in the US…"

Contrary to earlier expectations, the SEC approved the ETFs' 19b-4 filings on May 23, with S-1 orders still pending. Spot Ethereum ETFs are expected to launch in the coming weeks or months.

Despite optimism regarding regulatory shifts, Kaiko anticipates that Grayscale's ETHE fund could experience outflows, potentially exerting selling pressure on ETH once the new funds begin trading. Kaiko noted:

"The overall market impact of ETHE’s redemptions remains uncertain."

Grayscale's ETHE currently manages $11 billion in assets under management (AUM), and Kaiko forecasts average daily outflows of $110 million after it transitions to trading as an ETF. In comparison, Grayscale's Bitcoin fund, GBTC, saw outflows totaling $6.5 billion (23% of AUM) in its first month as an ETF, although inflows from other ETFs offset or exceeded these outflows by the end of January.

Kaiko also highlighted the launch of ETH ETFs in Hong Kong, noting their lackluster performance as indicating further uncertainty about the impact of ETHE redemptions on the market. Data from Farside showed that Hong Kong's spot ETH ETFs saw net outflows of $4.4 million since their early May launch.

Lastly, Kaiko commented on centralized exchange data, noting that ETH's market depth is approximately $226 million, representing a 42% decrease from its average levels before FTX. ETH's concentration on US exchanges has also decreased to 40%, down from 50% in early 2023.