Rumors have emerged in the crypto community about a potential exchange-traded fund (ETF) that would track leading NFT collections. Speculation began after Pudgy Penguins CEO Luca Netz hinted at the development of a new NFT-related investment product. However, experts argue that such a fund is unlikely to materialize anytime soon.
Why an NFT ETF Is Unlikely
Analysts point to several key technical challenges. James Butterfill, Head of Research at CoinShares, explained that the primary issue is NFT liquidity. Unlike cryptocurrencies, digital collectibles are not universally traded across all platforms, making pricing and market operations difficult.
Ryan Rasmussen, Head of Research at Bitwise Asset Management, added that the lack of standardized pricing mechanisms makes an NFT ETF technically complex. Even if investors were interested in accessing NFTs via an ETF, the market currently lacks sufficient demand to justify such an instrument.
Investors Are Not Ready Yet
Despite the success of Bitcoin ETFs, which have attracted over $103.8 billion in assets under management, NFTs remain a niche sector. Rasmussen noted that traditional investors still view NFTs as a "meaningless hype cycle" following the market crash in 2021.
This sentiment was echoed by Chris Akhavam, Business Director at the Magic Eden NFT marketplace. He believes that a major resurgence in the NFT market would be necessary before an ETF could gain traction.
When Could an NFT ETF Become a Reality?
Financial firms such as HashKey in Hong Kong acknowledge that an NFT ETF could be possible in the future, but they believe the market is still too young.
However, the idea of an ETF continues to attract attention from market participants. Akhavam argues that launching such a financial product could boost the legitimacy of NFTs and increase market liquidity.
"If an NFT ETF were ever announced, it would be a massive bullish signal," he said.
For now, though, the concept remains purely theoretical.
Experts believe that while declining trading volumes do not signify the end of the NFT market, they do indicate an ongoing transformation of the industry.