Spot Bitcoin ETF Adoption Pace Slowed by Due Diligence: Report

The adoption pace of spot Bitcoin exchange-traded funds (ETFs) recently approved in the United States has been slowed down by the due diligence processes of large trading platforms, according to a report from Bloomberg. 

As per the report, firms like LPL Financial Holdings, the largest independent broker-dealer in the United States founded in 1989, are currently looking into the new offerings from leading asset management firms like BlackRock and ARK Invest. 

Spot Bitcoin ETF Hype Slows Down

The Bloomberg report pointed out that these trading platforms are currently examining the spot Bitcoin ETFs that were approved by the Securities and Exchange Commission (SEC) on January 10. 

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

The firms are currently considering whether the offerings can be available for nearly 19,000 independent financial advisers overseeing $1.4 trillion in assets.

Due Diligence of BTC ETFs

Conducting due diligence is a meticulous investigative process that precedes any decision-making in the crypto space. 

This entails a thorough examination of facts, a nuanced understanding of potential risks and rewards, and a meticulous verification of the authenticity of information before committing financial or resource investments.

LPL Financial has Set a 3-Month Timeline

LPL Financial has set a three-month timeline to carry out its due diligence on spot Bitcoin ETFs. A critical aspect under scrutiny is the risk associated with the potential shutdown of ETFs in cases of poor performance, specifically if they fail to amass substantial assets.

“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 to facilitate that,” Pettman told Bloomberg.

He further added that for LPL, it’s important to “make sure that they [ETFs] are durable over time and that there is a good investment thesis. That’s ultimately the position that we normally come from when evaluating these.”

As per the data compiled by Bloomberg, 253 ETFs closed down in 2023 with an average amount of assets of $34 million. Some of these offerings were related to crypto, including the VanEck Digital Assets Mining ETF (DAM) and the Volt Crypto Industry Revolution. 

Slower Adoption of Spot Bitcoin ETFs

While the spot Bitcoin ETFs by BlackRock and Fidelity are performing quite well, Bloomberg analyst James Seyffart believes that the widespread adoption of such products will take time, adding:

“A lot of the big institutions, these warehouses, these platforms where brokers or advisers work, they can’t just buy anything they want. There’s like an approved list and a not approved list,” Seyffart said.

On the other hand, ads for spot Bitcoin ETFs might soon be coming on Instagram and Facebook, as earlier reported by TheCoinRise.