With New Fund, Bitwise Aims to Capture Renewed NFT Interest

key takeaways

Investors seeking exposure to top-tier NFT projects without a hefty buy-in are seeking out Bitwise Asset Management’s new fund
Although NFT sales are down about 218% from their August 2021 peak, they’ve been steadily rising for the past month

With NFT trading volumes on the rise, Bitwise Asset Management sees an opening to showcase its new fund to institutional investors.

The crypto investment firm launched its Blue-Chip NFT Index Fund last month with a focus on the 10 most valuable NFT collections by floor price market capitalization. Demand for the fund has been growing since, Bitwise Co-founder and CEO Hunter Horsley told Blockworks.

“Demand [for the fund] has been interesting, it’s a more specific investor,” Horsley said. “We serve hundreds of financial advisory firms across the country and our products like BITQ and BITW are where a lot of people start, but we’ve seen high-net worth individuals and advisors who have enthusiastic clients come in over the first month.”

The entry costs to owning the likes of a Bored Ape Yacht Club NFT — priced at a minimum of 84.5 ether, or $273,385 — are steep, so even wealthy individuals are looking for alternative ways to gain exposure to the space. Case in point: the fund has a minimum investment of $25,000.

The fund, which is rebalanced quarterly, focuses on the 10 most valuable NFT collections by market cap: Bored Ape Yacht Club, CryptoPunks, Mutant Ape Yacht Club, Cool Cats, VeeFriends, Autoglyphs, Meebits, Fidenza, CyberKongz Genesis and Chromie Squiggle.

This product has less frequent redemptions than the Bitwise 10 Crypto Index Fund, or BITW, Horsley said. It permits monthly redemptions after a six–month lockup.

The Blue-Chip NFT Index Fund is up 5.6% from its mid-December inception through Jan. 19, compared to the BITW, which is down 14.2% on the month but up 29.6% over the past 12 months.

In 2021, users sent over $44.2 billion worth of cryptocurrency through NFT marketplaces, according to a report by blockchain analytics company Chainalysis.

Horsley expects that interest to continue to grow this year.

“There’s been a steady stream [of demand] in December and January, primarily from high net worth individuals,” Horsley said. Demand for the NFT index has been similar to other hot sectors like decentralized finance (DeFi), he said.

Sticking to popular NFTs — the top 10 traded about $1.5 billion at the start of this month — are important for the fund to ensure liquidity, according to Horsley. Liquidity dries up quickly outside of the top 10 to 20 projects, he said.

“For this portfolio liquidity can be a challenge even still, but it’s doable,” he said. “If you move into mid caps or smaller assets it becomes more difficult.”

Bitwise managed over $1.3 billion overall at year end. The firm is known for managing the world’s largest crypto index fund, BITW, and creating products focusing on Bitcoin, Ethereum, DeFi, and crypto-focused equity indexes.

NFT sales were $563 million on Wednesday, down from an all-time high of $1.79 billion in sales last August, according to NFT data tracker NonFungible. Although NFT sales are down about 218% from its peak, they’ve been steadily rising for the past month.

“I think NFTs will explode in 2022,” Horsley said. “They are early in their life and similar to the early days of Bitcoin and Ethereum, they’re undeniably being pulled into the world.”

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