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The uptake of spot Bitcoin exchange-traded funds (ETFs) is currently experiencing a brief pause due to thorough due diligence procedures undertaken by significant trading platforms.
A recent report from Bloomberg indicates that firms such as LPL Financial Holdings, one of the largest independent broker-dealers in the United States, are meticulously reviewing the newly sanctioned Bitcoin ETFs prior to offering them to their clients.
LPL Financial, which manages $1.4 trillion in assets, aims to finalize its due diligence on Bitcoin ETFs within a three-month timeframe.
The firm is assessing various elements, including the potential for ETF closures should they not gather substantial assets.
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“We just want to see how they function in the markets,” stated Rob Pettman, vice president of wealth management solutions for LPL Financial.
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“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.”
Due diligence is an exhaustive evaluation conducted prior to making an investment choice. It entails meticulously verifying all information and comprehending the associated risks and opportunities.
The Bloomberg report notes that 253 ETFs were shut down in 2023, with an average asset value of $34 million.
This includes crypto-related products such as the VanEck Digital Assets Mining ETF (DAM) and the Volt Crypto Industry Revolution.
As of January 31, all the Bitcoin ETFs approved the previous month collectively held 656,421 BTC, valued at nearly $27 billion at current market prices.
However, the performance of these ETFs has been affected by outflows from the Grayscale Bitcoin Trust, which sold off a total of 132,195 Bitcoin following its transition from an over-the-counter product to a listed ETF.
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