$ETH rose to a high of $3,977 yesterday before retreating slightly to its current price level.
Kaiko Research recently announced that regulators' approval of a #Ethereum spot ETF signals an optimistic future for the digital asset, despite some immediate market challenges. The company emphasized that this development will largely remove the regulatory uncertainty surrounding the Ethereum taxonomy, thereby accelerating its long-term growth.
Ethereum ETF is awaiting final approval from the SEC
Will Cai, Head of Indices at Kaiko, commented on the significance of the SEC's decision, signaling a pivotal shift in how regulators view Ethereum. “The approval of #SEC is a clear sign that Ethereum is being treated as a commodity rather than a security,” he stated. This realization is important because it could set a precedent for how similar digital tokens are treated in the US market.
Furthermore, Cai emphasized that although the approval is an important milestone, the complete regulatory process still needs to be further developed. The SEC has approved the ETF's 19b-4 filing but still needs to approve the S-1 order. It is predicted that spot Ethereum ETFs could launch within weeks or months, marking a pivotal moment in the cryptocurrency investment landscape.
Grayscale Ethereum Fund Prepares for Outflows
Despite the optimism, Kaiko predicts the possibility of short-term volatility, especially regarding Grayscale's Ethereum fund, ETHE. With $11 billion in assets under management, the fund could experience significant capital outflows, which could put downward pressure on Ethereum's price. Kaiko estimates the average daily outflow from ETHE could be around $110 million after switching to the ETF.
This scenario mirrors the experience of Grayscale's Bitcoin fund, GBTC, which saw outflows of up to 23% of AUM in its first month of ETF trading. However, it is worth noting that other ETFs eventually offset these inflows, suggesting a potential equilibrium for Ethereum.
Hong Kong ETH ETFs experience net outflows
Kaiko also turned its focus to the global context, specifically the underperformance of Ethereum ETFs in Hong Kong. Since their inception in early May, these ETFs have recorded net inflows of $4.4 million, contributing to uncertainty about the evolution of US market dynamics.
Furthermore, analysis of centralized exchange data shows that Ethereum's market depth is currently about 42% lower than the #FTX pre-crash average and market concentration in the U.S. has dropped from 50% to 40% since the beginning of 2023. These figures highlight the evolving landscape of Ethereum trading and the broader implications of regulatory and market changes for accessibility and its stability.
