The widespread adoption of spot Bitcoin exchange-traded funds (ETFs) is experiencing a temporary slowdown as major trading platforms engage in thorough due diligence processes.
According to a recent report from Bloomberg, significant players like LPL Financial Holdings, a leading independent broker-dealer in the U.S., are meticulously scrutinizing recently approved Bitcoin ETFs before offering them to clients.
LPL Financial, overseeing assets totaling $1.4 trillion, aims to complete its due diligence on Bitcoin ETFs within three months. The evaluation encompasses various factors, including the potential closure of ETFs if they struggle to amass substantial assets.
“We just want to see how they work in the markets,” explained Rob Pettman, vice president of wealth management solutions for LPL Financial. “That can be a very negative experience for the investor, for the financial adviser. It’s also incredibly costly for a firm like ours operationally to help facilitate that.”
Due diligence, an in-depth analysis conducted before making investment decisions, involves meticulous fact-checking and understanding the associated risks and opportunities.
The Bloomberg report notes that in 2023, 253 ETFs, with an average asset value of $34 million, closed down. This included crypto-related products like the VanEck Digital Assets Mining ETF (DAM) and the Volt Crypto Industry Revolution.
As of January 31, the collectively approved Bitcoin ETFs from last month held 656,421 BTC, valued at almost $27 billion at current prices. However, the performance of these ETFs has been impacted by outflows from the Grayscale Bitcoin Trust, which sold a total of 132,195 Bitcoin after transitioning from an over-the-counter product to a listed ETF.
