First NFT ETF Is Closing as Once-Hot Crypto Trend Fizzles

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(Bloomberg) — The cri­sis in all things cryp­to looks set to claim anoth­er vic­tim as the first-ever exchange-trad­ed fund cen­tered on non­fun­gi­ble tokens pre­pares to liquidate.

The Defi­ance Dig­i­tal Rev­o­lu­tion ETF (tick­er NFTZ), which launched at the end of 2021, will close at the end of Feb­ru­ary, accord­ing to a press release. The fund, which tracked blockchain-relat­ed com­pa­nies and an NFT index, will start liq­ui­dat­ing its port­fo­lio on or about Feb. 16. 

“The fund failed to attract assets,” said Sylvia Jablon­s­ki, CEO and CIO at Defi­ance ETFs. 

Its unwind­ing takes place as the hype over dig­i­tal assets fiz­zles out dra­mat­i­cal­ly as prices slump and investors no longer flock toward things like Bit­coin, decen­tral­ized finance, NFTs and oth­er cryp­to-cen­tric things that had gath­ered inter­est dur­ing the ear­ly pan­dem­ic years. 

Inter­est in NFTs, which allows hold­ers of art and col­lectibles to track own­er­ship, surged dur­ing 2021 when cryp­tocur­ren­cies were ral­ly­ing. But a more hawk­ish Fed­er­al Reserve has cre­at­ed a severe­ly pro­hib­i­tive envi­ron­ment for spec­u­la­tive assets, lead­ing to a plunge in dig­i­tal-token prices. Bit­coin, the largest cryp­to by mar­ket val­ue, is cur­rent­ly trad­ing around $23,150, down from near $69,000 at the end of 2021. 

NFTZ, which didn’t invest in cryp­tocur­ren­cies direct­ly, is clos­ing out Jan­u­ary with rough­ly $5.3 mil­lion in assets, com­pared with near­ly $14 mil­lion at its height in March 2022, data com­piled by Bloomberg show.

Oth­er cryp­to-relat­ed ETFs are also shut­ter­ing as the indus­try buck­les in the wake of a num­ber of scan­dals and bank­rupt­cies. The implo­sion of the FTX empire left investors reel­ing and led to the down­fall of some of the space’s most impor­tant play­ers. Launch­es world­wide for exchange-trad­ed prod­ucts focused on dig­i­tal assets have been slow­ing to a trickle. 

Read more: Cryp­to-Prod­uct Pipeline Goes Bust as Sur­vival Questioned

“As you start to hit that cryp­to win­ter that we’re in, it makes sense that a lot of the invest­ments that are based off of that entire seg­ment are going to start dry­ing up,” said Shawn Cruz, head trad­ing strate­gist at TD Amer­i­trade. “You need some sort of base­line of investor inter­est into your ETF, fund, what­ev­er it is — oth­er­wise it’s not worth the headache of try­ing to keep it going. It just doesn’t make sense from a busi­ness standpoint.”

–With assis­tance from Sam Potter.

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