(Bloomberg) – With approval of a conventional cryptocurrency ETF still not in sight, at least one U.S. fund manager is looking to exploit one of blockchain’s other hot trends.
Defiance ETFs is launching the Defiance Digital Revolution ETF (ticker NFTZ) on Thursday, which will track an index of blockchain-related companies and non-fungible tokens. It won’t invest directly in cryptocurrencies – the gauge tracks companies with exposure to the industry – but it is one of the first ETFs to tap into the burgeoning NFT market.
The United States Securities and Exchange Commission has cleared an ETF that holds Bitcoin futures contracts to start trading in October, the closest regulators came to approving a fund that invests in cryptocurrencies. Blockchain thematic ETFs have proliferated as the SEC has rejected many applications for a spot ETF in recent years.
The NFTZ fund “is a great way for investors to access not only the technological side of the rapidly growing blockchain of the digital world, but also the companies involved in the renaissance of NFTs,” said Sylvia Jablonski, director of investments for Defiance ETF. “The companies in this index are key players in building Web 3.0,” or an idealized version of the decentralized, blockchain-based Internet.
The fund has a management fee of 0.65%. This equals $ 6.50 for every $ 1,000 invested. Its main positions are Silvergate Capital Corp., Cloudflare, Inc., Bitfarms Ltd., Marathon Digital Holdings Inc., Hut 8 Mining Corp. and Coinbase Global Inc., among others.
NFTs, which allow holders of works of art, collectibles and just about any other asset to track ownership, caught fire this year amid a larger boom in the markets of cryptography. Investors have handed out mind-blowing monies on rock images, cartoonish depictions of penguins and monkeys, and other concoctions and works of art.
The nonfongible.com website lists approximately 766,000 sales in the past month with some $ 1.8 billion spent in total. Not all NFTs are successful – there is plenty of data to show that many are nipples – but the average price sold for around $ 2,326 over that period, according to the site.
“NFTs are what Bitcoin was 10 years ago today, except there is a strong community of creators and investors who coexist to determine the future trajectory of a non-fungible token,” said Jablonski. “They are part of a special club, a membership, and so investing takes on this new meaning of social interaction.”
–With help from Olga Kharif, Claire Ballentine and Katie Greifeld.