LPL Financial Holdings Deliberates on Bitcoin ETFs

LPL Financial Holdings a U.S. broker-dealer is conducting due diligence on approved ETFs to assess their suitability for financial advisers.

Exchange-traded funds that include bitcoin has slowed down as a result of the due diligence procedures implemented by significant trading platforms.

LPL Financial Holdings, one of the largest independent broker-dealers in the United States, is currently examining the recently approved Bitcoin exchange-traded funds (ETFs) to determine their availability for nearly 19,000 independent financial advisers responsible for managing assets worth $1.4 trillion, as reported by Bloomberg on February 3.

Rob Pettman, vice president of wealth management solutions for LPL Financial Holdings stated that the company’s primary objective is to observe the performance of investors in the market.

Performing a thorough investigation before making a decision is known as “due diligence.” In order to ensure that everything is as it seems before spending money or resources, it is necessary to thoroughly check all of the facts, obtain knowledge of the dangers and opportunities and make sure that everything is accurate.

Within the next three months, LPL Financial Holdings intends to finish its due diligence on Bitcoin exchange-traded funds (ETFs). LPL Financial Holdings is considering the possibility of discontinuing exchange-traded funds (ETFs) if they underperform and fail to accumulate sufficient assets.

The investor and the financial adviser may have a very poor experience as a result of these circumstances. “It is also extremely expensive for a company like ours to help facilitate that from an operational standpoint,” Pettman said in an interview with Bloomberg.

He went on to say that it is essential for LPL Financial Holdings to make sure that they [ETFs] are durable over time and that there is a good investment thesis. When it comes to considering them, that is the position that we typically take in the end.

There were 253 exchange-traded funds (ETFs) that went out of business in 2023, with an average asset value of $34 million according to data collected by Bloomberg.

The list includes products connected to cryptocurrencies. Some examples include the Volt Crypto Industry Revolution and the VanEck Digital Assets Mining ETF (DAM).

James Seyffart, an ETF analyst at Bloomberg is of the opinion that the mainstream adoption of Bitcoin exchange-traded funds (ETFs) may be slower than anticipated.

“I do not think we’re going to get over $100 billion in the first year or two. To put in perspective, gold ETFs have about $100 billion in the U.S. in total.”

In January, Seyffart made a prediction during a private webinar with CryptoQuant that exchange-traded funds (ETFs) might potentially draw $10 billion in inflows in their first year of operation. “Many of the large organizations, such as these warehouses and these platforms where brokers or advisers work, are unable to just purchase anything they choose.

In a sense, there is a list that has been approved and a list that has not been approved,” the analyst added. All of the Bitcoin exchange-traded funds (ETFs) approved the previous month owned a total of 656,421 BTC as of January 31st.

The total holdings of 656,421 BTC represent an increase of around 3% from the initial total holdings of 637,610 BTC, valued at nearly $27 billion at the current price.

The outflows from the Grayscale Bitcoin Trust (GBTC), which dumped a total of 132,195 Bitcoin after its conversion from an over-the-counter product to a listed ETF, had a significant impact on the performance of the exchange-traded funds (ETFs).

Time will test the investment premise. Pettman, who works for LPL, stated that this is essentially what they were keeping an eye on at the time.