nft_etf_news
Rumors of an NFT ETF Surface
Rumors of an exchange-traded fund (ETF) tracking the top NFT collections have started to swirl, stemming from a post on social media made by Pudgy Penguins CEO Luca Netz. However, ETF issuers and market experts told Decrypt that such a fund is unlikely to be imminent because traditional investors still believe NFTs are mostly “nonsense.”
Speculations Arise Amid Crypto Reserve Talks
With a U.S. crypto reserve rumored to be on the horizon following an announcement from President Donald Trump, NFT enthusiasts began questioning whether an NFT reserve could ever be a possibility. In response, Netz retweeted the post, adding that he has been working on “something for our JPEGs”—fueling speculation that an NFT ETF was on the way.
However, experts who spoke with Decrypt poured cold water on the idea.
Challenges in Launching an NFT ETF
“An NFT ETF would face significant technical and structural challenges, primarily due to the illiquidity of NFTs,” said James Butterfill, Head of Research at CoinShares. He explained that such illiquidity “makes price discovery and market-making nearly impossible—similar to why real estate ETFs are rare.”
Ryan Rasmussen, head of research at ETF provider Bitwise Asset Management, explained that technical challenges would mean that funds would have to construct pricing methodologies, as NFTs aren’t priced equally across the board. He pointed to Bitwise’s NFT index as an example of this in action.
Equally, the illiquidity of the assets prevents the issuer from safely entering and exiting a position without impacting the market. That said, Rasmussen believes it is “possible” despite the technical challenge.
Comparisons to Bitcoin ETFs
The reason an ETF is created is to help bring liquidity into a market or asset class. For example, spot U.S. Bitcoin ETFs currently hold $103.8 billion in assets under management, according to CoinGlass, and have seen billions of dollars worth of volume every day since October. A great deal of that volume is coming from investors who were unlikely to invest in crypto otherwise, said Rasmussen, adding that there isn’t the same demand for NFTs.
“From my experience, the conversations we’re having are still stuck in the post-2021 NFT bust headlines,” he explained. “The idea that traditional investors are looking to get exposure to NFTs as an ETF, to me, is not that believable.”
Future Prospects and Market Sentiment
Chris Akhavam, Chief Business Officer at NFT marketplace Magic Eden, argued that the chances of an NFT ETF will pick up amid the sector’s next major growth run. He explained that the current market doesn’t have enough liquidity to support the additional demand an ETF could bring.
“I think the likelihood of an NFT ETF passing this year is very low, or just unlikely to happen at all.” Rasmussen told Decrypt, adding that, “I just think that most investors today believe that NFTs are nonsense. It’s not a view that I hold, but I do hear it.”
Hong Kong ETF provider HashKey echoed a similar sentiment, telling Decrypt that “NFT ETFs are likely a longer-term prospect rather than an immediate reality,” as the market is still young and maturing.
Long-Term Outlook
That doesn’t stop market participants from dreaming, however.
An NFT ETF would provide legitimacy as well as possible growth to an asset class that has been beaten down from its 2021 highs—much like Bitcoin and Ethereum before their ETF approvals.
“An NFT ETF would be seen as incredibly bullish for the space,” Akhavam said. “I’d expect a lot of buy demand to hit NFTs on the back of any ETF announcements, as people would see that as major validation of the asset class. This would drive meaningful growth in NFT liquidity and market caps.”
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