Bitcoin ETFs promotion stalled due diligence: Bloomberg

Adoption of Bitcoin exchange-traded funds has slowed due to due diligence procedures from large trading platforms.

According to a Feb. 3 report from Bloomberg, firms such as LPL Financial Holdings, one of the largest independent broker-dealers in the United States, are currently examining the recently approved Bitcoin ETFs to determine whether there will be nearly 19,000 free financing advisors overseeing $1.4 trillion in assets.

“We want to see how they work in the markets,” said Rob Pettman, LPL Financial's vice president of wealth management solutions.

Due diligence is a thorough analysis before a decision is made. It involves carefully examining all the facts, understanding the risks and opportunities, and making sure everything is seen before spending money or resources.

LPL Financial plans to complete its due diligence on Bitcoin ETFs within three months. A key point in evaluation is the possibility that ETFs may be closed if they perform poorly, not accumulating significant assets.

“This can be a very negative experience for the investor, the financial advisor. “It's incredibly valuable for an organization like ours to help facilitate that,” Pettman told Bloomberg, citing LLP. [ETFs] They are sustainable over time as there is good investment research. This is the position we will eventually come to when we evaluate these.

According to data compiled by Bloomberg, 253 ETFs closed in 2023 with an average of $34 million in assets. The list includes crypto-based products such as the VanEck Digital Assets Mining ETF (DAM) and the Vault Crypto Industry Revolution.

Bloomberg ETF analyst James Seifert believes widespread adoption of Bitcoin ETFs may be slower than expected. During a private webinar with CryptoQuant in January, Seifert predicted that ETFs could attract $10 billion in revenue in their first year.

“A lot of the big institutions, these warehouses, these platforms where brokers or advisors work, you can't just buy what you want. There is an approved list and an unapproved list,” the analyst explained.

“I don't think we'll get more than $100 billion in the first year or two. […] For reference, gold ETFs have about $100 billion in total in the US.

As of January 31st, all Bitcoin ETFs approved in the past month collectively held 656,421 BTC, about 3% of the initial total holdings of 637,610 BTC, which is roughly $27 billion at current prices. ETFs' performance was heavily impacted by outflows from the Greyscale Bitcoin Trust (GBTC), which saw a total of 132,195 bitcoins converted from an over-the-counter product to a listed ETF.

Time will tell about investment theory. And that's what we're pursuing right now,” said LPL's Pettman.

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