Financial Giants Exercise Caution with Bitcoin ETFs: Bloomberg Reports

The excitement surrounding the approval of Bitcoin exchange-traded funds (ETFs) is being tempered by the careful scrutiny of large trading platforms, as they undertake thorough due diligence processes. A report from Bloomberg on Saturday highlighted that entities like LPL Financial Holdings, leading independent broker-dealer in the U.S., are meticulously evaluating the newly approved Bitcoin ETFs. These funds are under consideration for inclusion in the portfolios of nearly 19,000 independent financial advisers who manage assets totaling $1.4 trillion.

Rob Pettman, LPL Financial’s vice president of wealth management solutions, explained the cautious approach stating, “We just want to see how they work in the markets.” This comment underscores the importance of due diligence, a detailed investigation aimed at ensuring a comprehensive understanding of all relevant facts, risks, and opportunities before making an investment decision.

LPL Financial is aiming to complete its evaluation of Bitcoin ETFs within three months. A particular concern being assessed is the risk of ETFs being discontinued if they fail to attract enough investment, which could result in a costly and negative outcome for both investors and advisers. Pettman emphasized the importance of ETF durability and a solid investment rationale, saying, “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.”

According to data compiled by Bloomberg, there were 253 ETF closures in 2023, each with an average asset total of $34 million, including cryptocurrency-related products like the VanEck Digital Assets Mining ETF (DAM) and the Volt Crypto Industry Revolution. Pettman concluded, “Time is going to tell on the investment thesis. And that’s essentially what we’re monitoring at the moment,” highlighting the cautious stance LPL Financial is taking towards integrating Bitcoin ETFs into their offerings.