Kaiko Research indicates that the SEC’s approval of spot Ethereum ETFs signals positive regulatory clarity and long-term growth for Ethereum.
Despite some immediate market issues, Kaiko Research’s recent announcement suggests that regulatory bodies’ acceptance of spot Ethereum ETFs points to an optimistic future for the digital currency.
This new discovery, the company emphasizes, eliminates a significant amount of regulatory uncertainty that was previously associated with Ethereum’s classification, which in turn helps to support Ethereum’s long-term growth. Will Cai, Head of Indices at Kaiko, commented on the significance of the SEC’s decision, indicating a significant shift in regulatory entities’ view of Ethereum.
The SEC’s approval of Ethereum is a clear indication that we treat Ethereum as a commodity rather than a security,” he stated. This perspective holds significant importance as it likely sets a precedent for the treatment of tokens of a similar nature in the US market. Cai also highlighted the need to further develop the entire regulatory procedure, despite the approval being a significant step forward.
The SEC has accepted the 19b-4 filings received by the ETFs, but they still need to grant the S-1 orders. Over the next few weeks or months, spot Ethereum ETFs could emerge, marking a significant milestone in the realm of cryptocurrency investing opportunities.
In spite of the optimism, Kaiko forecasts that there will be some potential volatility in the short term, particularly with regard to Grayscale’s Ethereum fund, identified as ETHE. Because the fund manages assets worth 11 billion dollars, it is possible that it will see significant outflows, which could put downward pressure on the price of Ethereum.
Kaiko predicts that the conversion of ETHE into an exchange-traded fund (ETF) will result in average daily outflows of approximately 110 million dollars. During the first month of ETF trading, Grayscale’s Bitcoin fund, GBTC, saw outflows that amounted to 23% of its assets under management (AUM). This scenario is similar to the experience that Grayscale had with its Bitcoin fund.
Hong Kong Ethereum ETFs See Net Outflows
Having said that, it is important to remember that other exchange-traded funds eventually counterbalanced similar outflows, suggesting that Ethereum may also eventually achieve a state of equilibrium. Additionally, Kaiko shifted its attention to the international landscape, specifically the unimpressive performance of Ethereum ETFs in Hong Kong.
Since their start at the beginning of May, these exchange-traded funds (ETFs) have registered net outflows of $4.4 million, which has contributed to the concern regarding the potential developments in the United States market. Furthermore, the examination of data from centralized exchanges reveals that Ethereum’s market depth is currently approximately 42 percent lower than its typical levels before the collapse of FTX.
Furthermore, the market concentration in the United States has declined from fifty percent to forty percent since the start of 2023. The aforementioned numbers shed light on the dynamic nature of Ethereum trading and the wider implications that changes in regulatory and market conditions have on the cryptocurrency’s accessibility and stability.