- The Defiance Digital Revolution ETF (NFTZ) trades on the New York Stock Exchange and has an expense ratio of 65 basis points
- New fund joins a crowding field of crypto- and blockchain-related equity offerings in the US as issuers await approval of spot bitcoin ETFs
Defiance ETFs has added to the growing list of blockchain-related equity offerings that do not invest in crypto assets directly, though the firm intends for the fund to focus on NFTs a bit more than its competitors.
The Defiance Digital Revolution ETF (NFTZ) launched on Thursday and trades on the New York Stock Exchange. The new product, which has an expense ratio of 65 basis points, offers investors exposure to the NFT, blockchain and cryptocurrency ecosystems by investing in NFT marketplaces and issuers.
NFTZ tracks the BITA NFT and Blockchain Select Index, which consists of the stock of companies that are building a platform or developing technology to use NFTs, trading platforms, mining or banking services in the crypto space, as well as blockchain-related technology. It may also include businesses that intend to become involved in these spaces.
The fund’s top five holdings are Silvergate, Cloudflare, Northern Data, Bitfarms and Playboy owner PLBY Group. The latter company unveiled an NFT collection — Playboy Rabbitars — in October.
Defiance currently has eight other ETFs trading in the US with combined assets of nearly $1.7 billion, according to ETF.com. Its largest is the $1.3 billion Defiance Next Gen Connectivity ETF (FIVG), which it launched in March 2019.
‘Bigger than the internet’
Sylvia Jablonski, Defiance’s co-founder and chief investment officer, told Blockworks that NFTs will be bigger than the internet.
“NFTs are special; they have created this cultural revolution,” she said. “They are the key to everything that is or will be the metaverse, [and] digital tokens will represent land ownership in the metaverse.”
NFTs reward creators of content, art and data and allow buyers to participate in a particular project, Jablonski explained. These tokens will represent fashion houses like Gucci and Nike, she noted, as well as tickets to events in the real world and metaverse.
Investors of stocks benefit when those stocks go up, and the company benefits in that they can use the funds it raises to take measures to boost the value of the stock, the CIO added.
“With NFTs, the value and direction of the asset is determined both by the creator and the investor,” Jablonski said. “People like to participate in something, and I think that special aspect is what will make this space essentially grow to be huge.”
Just another blockchain ETF?
NFTZ adds to the growing list of crypto or blockchain-related equity ETFs in the US as regulators have not yet approved ETFs that would invest in bitcoin and other crypto assets directly.
The largest crypto equity ETF in the US is Amplify Investments’ Transformational Data Sharing ETF (BLOK) which has grown to nearly $1.7 billion in assets under management since its January 2018 launch.
A handful of similar products have launched this year, including the $130 million Bitwise Crypto Industry Innovators ETF (BITQ), the First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT), the Volt Crypto Industry Revolution and Tech ETF (BTCR) and the Invesco Alerian Galaxy Crypto Economy ETF (SATO).
The key difference of NFTZ to its competitors is that Defiance invests in stocks specifically involved in the issuance, creation and commercialization of NFTs, Jablonski said.
While some of the competing offerings are actively managed, the Defiance co-founder added that providing transparency for the investor is a main goal of the firm.
“We feel our investors should see what we hold, when and how we select holdings based on index rules,” she said. “It also helps keep efficient markets so that clients and market makers are able to trade or hedge with full transparency.”
Nathan Geraci, president of The ETF Store, said that due to the lack of pure-play companies offering exposure to the crypto space, a lot of the ETFs in the segment end up looking similar.
“Given the limited investment universe,” he told Blockworks, “I think NFTZ will have a difficult time differentiating itself from other blockchain ETFs at this early juncture.”
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