Kaiko Research stated on May 27 that while spot Ethereum ETF approvals are a positive indicator for the digital asset’s long-term growth, they may face short-term challenges. The report highlights that these approvals have reduced regulatory uncertainty regarding Ethereum’s asset classification.

Will Cai, Head of Indices at Kaiko, noted that the SEC's approval implies ETH is being treated more like a commodity than a security, which could positively influence the regulation of similar tokens in the US.

Contrary to previous expectations, the SEC approved the ETFs' 19b-4 filings on May 23, though S-1 orders still need approval. Spot Ethereum ETFs are expected to launch soon.

Despite the positive regulatory outlook, Kaiko predicts Grayscale’s ETHE fund may see outflows, potentially exerting selling pressure on ETH as new funds begin trading. Grayscale’s ETHE has $11 billion in assets under management, and Kaiko expects daily outflows to average $110 million once it trades as an ETF. For context, Grayscale’s Bitcoin fund, GBTC, experienced $6.5 billion in outflows (23% of its AUM) in its first month as an ETF, with other ETFs offsetting these outflows by the end of January.

Kaiko also mentioned the "lackluster" performance of Hong Kong’s ETH ETFs, indicating uncertainty about the impact of ETHE redemptions on the market. Since their launch in early May, Hong Kong’s spot ETH ETFs have seen $4.4 million in net outflows, according to Farside data.

Additionally, Kaiko commented on centralized exchange data, noting that ETH's market depth is about $226 million, 42% below pre-FTX levels, and that ETH concentration on US exchanges has dropped from 50% in early 2023 to 40%.