According to analysts at S&P Global Ratings, the potential approval of Ethereum exchange-traded funds in US incorporating staking could lead to increased concentration risk for the market's second-largest crypto by market capitalization, Bloomberg has reported.
These believe the US Securities and Exchange Commission (SEC) could approve these ETFs in May this year, and issuers are likely to choose institutional cryptocurrency custodians, rather than decentralized protocols such as Lido, which is currently Ethereum's largest validator.
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Analysts have noted the impact on concentration will vary depending on whether issuers diversify their holdings across multiple custodians.
Analysts at JPMorgan have also expressed concern about Ethereum's concentration risk, stating that centralization by a single entity or protocol could lead to potential risks such as failures, attacks or collusion that could harm the interests of the community.