Bitcoin ETF Adoption Slows Due to Rigorous Due Diligence by Major Trading Platforms
Summary:
Major trading platforms' rigorous due diligence processes have delayed the adoption of Bitcoin ETFs. Companies like LPL Financial Holdings are evaluating these ETFs for suitability for their financial advisors managing assets worth $1.4 trillion. LPL Financial plans to complete its due diligence within three months, with a key point of evaluation being the risk of ETFs being shut down if they underperform. Despite these challenges, as of Jan. 31, all the Bitcoin ETFs authorized last month have seen a 3% increase in holdings. However, analysts predict the mass adoption of Bitcoin ETFs may take longer than anticipated.
Rigorous scrutiny from major trading platforms has caused a delay in the adoption of Bitcoin exchange-traded funds (ETFs). A report by Bloomberg on Feb. 3 revealed that entities such as LPL Financial Holdings, a leading independent broker-dealer in the U.S., are currently evaluating the recently sanctioned Bitcoin ETFs to decide if they are suitable for nearly 19,000 independent financial advisors managing assets worth $1.4 trillion. Rob Pettman, the vice president of wealth management solutions for LPL Financial, expressed they're keen to see how these ETFs perform in the markets. Due diligence involves an in-depth analysis to understand the risks and opportunities before making an investment decision. LPL Financial aims to complete its Bitcoin ETFs due diligence within the next three months. Among the many factors being assessed is the risk of ETFs getting closed if they perform poorly and don't amass significant assets. Pettman informed Bloomberg that such an event could be detrimental to both the investor and the financial advisor and could prove costly for firms like LPL Financial in facilitating this process. Hence, it's vital for them to ensure the ETFs are sustainable over time and have a robust investment thesis. As per Bloomberg data, 253 ETFs got shut down in 2023, carrying an average asset value of $34 million. Included in this list are crypto-related products like VanEck Digital Assets Mining ETF (DAM) and the Volt Crypto Industry Revolution. Bloomberg’s ETF analyst James Seyffart suggests that the mass adoption of Bitcoin ETFs may take longer than anticipated. Seyffart estimated during a private CryptoQuant webinar held in January that ETFs may draw in $10 billion in their first year, which is a conservative estimate compared to gold ETFs' $100 billion in the U.S. market. As of Jan. 31, all Bitcoin ETFs authorized last month collectively held 656,421 BTC, which is about 3% more than the initial 637,610 BTC and valued close to $27 billion. The Grayscale Bitcoin Trust's (GBTC) outflows, which let go of a total of 132,195 Bitcoin following its conversion from an over-the-counter product to a listed ETF, significantly impacted these ETFs. “We're monitoring the investment thesis closely...only time will tell its effectiveness,” explained LPL's Pettman. Magazine: Should children be introduced to Bitcoin? The argument for Bitcoin-focused children's books.
Published At
2/3/2024 8:14:02 PM
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