Industry Giants Like LPL Financial Examining Recently Approved Bitcoin ETFs
Bitcoin ETFs : Bitcoin exchange-traded funds (ETFs) may face delays as major trading platforms like LPL Financial Holdings conduct stringent due diligence processes on them, Bloomberg reported on February 3. LPL is one of the United States‘ leading independent broker-dealers and has recently approved several Bitcoin ETFs for review to assess their viability for managing over 19,000 independent financial advisers whose combined assets total approximately $1.4 trillion.
Due Diligence Is Key for Assessing Viability
Due diligence is an essential step that financial institutions take before investing, as it helps assess risks, opportunities and market dynamics. Rob Pettman of LPL Financial stressed the significance of understanding how ETFs function within markets – with due diligence’s aim being to ensure they possess strong investment theses that stand the test of time.
Assessing ETF Shutdown Risk
LPL Financial intends to complete its due diligence on Bitcoin ETFs within three months, with special attention paid to assessing whether underperforming ETFs could be closed down by investors and financial advisers alike, with Pettman noting the operational cost involved with providing such closures.
Industry Data Raise Caution Amid Hopes
Bloomberg data compiled in 2023 revealed 253 ETFs closed down, including crypto-tied products, with an average asset value of $34 million. ETF analyst James Seyffart warned against expecting wider acceptance of Bitcoin ETFs as large institutions often adhere to approved investment lists when choosing investments for themselves and may restrict adoption at first.
ETF Performance in Light of Industry Dynamics
As of January 31st, all Bitcoin ETFs approved in December collectively held 656,421 BTC, representing an increase of 3% compared to initial holdings. Grayscale Bitcoin Trust (GBTC), in particular, experienced notable outflows totalling 132,195 Bitcoin since changing from over-the-counter product to listed ETF status. This outflow significantly affected performance among all ETFs approved last month.
Analyst Predictions and Industry Sentiment
Bloomberg ETF analyst James Seyffart predicted during a private webinar with CryptoQuant in January that ETFs could attract $10 billion in their first year, although he acknowledged institutional approval processes could pose difficulties and caution should be exercised when doing so.
Adopt a Cautionary Approach Toward Bitcoin ETFs
Overall, Bitcoin ETF adoption has been slower than anticipated as major players in the financial industry engage in thorough due diligence processes. Industry players closely observe performance and viability of ETFs while keeping an eye out for potential risks and investment thesis; time will tell if such cautious approaches lead to successful mainstream integration of these products.
