The world’s first exchange-traded fund (ETF) for NFTs, NFTZ, is shutting down. Defiance ETFs, the company behind NFTZ, recently announced its decision to “close and liquidate” the fund by February 28th. This news has come as a surprise to many, especially since NFTZ had a highly anticipated launch back in December 2021.
NFTZ was a novel investment vehicle that allowed investors to gain exposure to companies involved in the NFT and cryptocurrency space. The ETF tracked firms like toy collectibles company Funko, online marketplace Ebay, and digital asset exchange Coinbase. With shares of the fund listed on the New York Stock Exchange, NFTZ was poised to be a game-changer in the investment world.
However, things did not go as planned for NFTZ. Despite the hype surrounding the NFT market in 2021, the ETF struggled to gain traction and fell 11% in its first two days of trading. This price drop, along with a general decline in interest in the crypto world, ultimately led to the downfall of NFTZ.
ETFs, such as NFTZ, are popular investment vehicles that offer indirect exposure to underlying assets through shares. In the case of NFTZ, investors could own a stake in several companies related to the NFT space without having to store the assets themselves. This was a novel concept, as other NFT ETFs, like KuCoin’s NFT ETF, only allowed users to own proportionally shared ownership of specific NFTs.
The rise of NFTs in 2021 was nothing short of spectacular. Celebrities, major companies, and investors flocked to the NFT market, eager to get in on the action. However, with the price of Bitcoin and other cryptocurrencies plummeting, interest in the crypto world has waned, and NFTs have not been immune to this trend.
The Future of Crypto ETFs
Despite the downfall of NFTZ, the SEC has approved a fourth Bitcoin futures ETF. This ETF is different from previous offerings in that it tracks the futures of Bitcoin rather than directly tracking the digital currency itself. Bitcoin spot ETFs, which directly track the largest digital currency, are not yet available in the US. While many major crypto companies have applied to launch one, they have thus far been rejected by the SEC.
In conclusion, the story of NFTZ serves as a cautionary tale for those looking to invest in the crypto space. The rapid rise and fall of NFTZ is a reminder of the inherent risks and volatility of the cryptocurrency market. It remains to be seen what the future holds for NFTs and other crypto ETFs, but for now, investors should proceed with caution.