Interest in NFTs has transcended the boundaries of crypto investors to traditional ones. Are there any ETFs to invest in this sector?
In 2021, the world of non-fungible-token (NFT) was the centre of strong interest. From being completely unknown, the acronym NFT has become one of the most searched words on the web. Despite this, an investor unfamiliar with decentralized finance may find it very difficult to invest his money directly in NFTs.
The investment process is different from the traditional one: in fact, it is currently not possible to buy a non-fungible token from a bank intermediary or a broker. Interested parties must therefore create a digital wallet, or just wallet in jargon, and buy their assets through a marketplace. The purchase process and subsequent NFT storage method can be complicated and unsafe for an investor who may prefer to invest in traditional instruments, such as ETF.
Fortunately, interest in this sector has skyrocketed and the world of asset management has developed various financial instruments that allow investment in NFTs without exposing themselves to the risks of decentralized finance.
Buying ETFs to gain exposure to the NFT market
First of all, one aspect should be clarified: currently there are no ETFs or ETNs that allow you to faithfully replicate the performance of a basket of NFTs. The passive replication instruments which currently give the possibility of exposure to the non-fungible token market make it possible to invest in a book of securities listed on the stock market with business focused on the world of software, Metaverse and the of gaming.
These stocks predominantly use NFTs to fuel their business structure and are therefore particularly correlated with the digital assets industry.
In essence, buying an ETF will not expose the investor directly to the value dynamics inherent in non-fungible tokens, rather it will offer a weighted exposure to the instruments issued by companies operating in that sector.
Finally, it is important not to make the mistake of thinking that the trend of the NFT market mirrors the price trend of fungible tokens. In the past, the two sectors have often had a discordant trend and there are not enough empirical data to speak with statistical certainty of a correlation. Investing in a blockchain-themed generalized fund does not ensure exposure to the NFT world.
Which ETFs allow you to bet on NFTs
The ETF Defiance Digital Revolution is a fund listed on the New York Stock Exchange which faithfully replicates the performance of the BITA NFT and Blockchain Select Index. The basket of securities must meet certain selection criteria: they must be companies with a business focused on the crypto and NFT market or with significant investments in this sector. The companies in question must therefore have profits deriving mainly from activities related to the decentralized world. The fund is rebalanced quarterly and offers weighted exposure to many well-known companies in the industry including Coinbase Global Inc..
While not 100% representative of the NFT world, the Metaverse sector certainly represents a good portion of it. The HANetf ETC Group Global Metaverse UCITS ETF invests in stocks with a Metaverse focus and, despite being a relatively small fund, has attracted many investors over the last couple of years. It faithfully follows the performance of the German SOLACTIVE ETC GROUP GLOBAL METAVERSE INDEX, which in turn is made up of some companies expressly operating in the virtual reality sector including SNAP INC., ROBLOX CORP., NVIDIA CORP., META PLATFORMS INC. (Reality Labs) and UNITY SOFTWARE INC..
Another ETF that has made a lot of headlines over the last year is Roundhill Ball Metaverse UCITS. The heart of the tool in question is the world of Metaverse-themed video games.
Is it worth investing in NFTs through ETFs?
Unfortunately, there is not enough historical data to evaluate the quality of many of the existing ETFs. In addition, since their creation the NFT market has undergone a sharp downsizing of its valuations and many companies have discounted significant declines in their fundamentals, consequently also in stock exchange prices. Investing currently involves the assumption of significant risks that must necessarily be considered when considering the hypothesis of allocating part of one’s capital in these ETFs.
Original article published on Money.it Italy 2022-11-02 21:03:00.
Original title: Gli ETF per investire in NFT, la guida completa
