The NFTZ ETF, which had been heralded as the first of its kind for NFTs, is shutting down. By February 28, Defiance ETFs announced that it would “close and liquidate” NFTZ, its Defiance Digital Revolution ETF.
Exchange-Traded Fund
Exchange-Traded Funds are well-known financial instruments that provide indirect exposure to an underlying asset through shares, such as gold, foreign currencies, or bitcoin. This eliminates the need to store such assets and enables investors to diversify their portfolios. An Exchange-Traded Fund called NFTZ allows investors to own shares in a range of companies that are somehow associated with the NFT industry. The fund exposes investors to a range of stakeholders in the cryptocurrency ecosystem, including companies engaged in mining, asset management, trading, banking, payment processing, and the sale of blockchain or mining gear. NFTZ distinguished itself from its rivals by being the first to include exposure to companies involved in issuing, creating, and commercializing nonfungible tokens. This strategy made the fund similar to other crypto industry ETFs that were already available at the time of its launch, but it distinguished itself from its rivals by being the first to do so (NFTs).
NFTZ did not take off despite the early enthusiasm. According to the ETF’s developers, the low demand for NFT ETFs and its high fees are to blame for its failure. Many investors harbor skepticism against the NFT market and favor putting their money into more conventional investments like stocks and bonds. Furthermore, NFT ETFs have higher management fees than standard ETFs due to the high level of technical skill required to operate them, which deters investors concerned about costs from investing in them.
A recent news release says that NFTZ will shut down at the end of February. On February 16, the fund will start selling off the assets in its portfolio. This will cause the Fund to increase its cash holdings and deviate from its stated investment goals and strategies in its prospectus. Also, it won’t take orders for new creation units after the end of business on the last business day before the Liquidation Date, and trading in shares of the Fund will stop before the market opens on the Liquidation Date.
Conclusion
Notwithstanding the disappointment of the NFTZ flop, it is critical to remember that the NFT market is still in its early stages. It can’t be overlooked that other NFT ETFs may experience greater success in the future. These developments may increase the appeal of NFT ETFs to investors as the NFT market is always expanding and changing. Despite the NFT market’s relative youth, it is already creating a stir. The market is getting more and more attention as NFTs are expected to reach $2 billion in total value in 2021.
