(Bloomberg) — The crisis in all things crypto looks set to claim another victim, as the first-ever exchange-traded fund centered on non-fungible tokens prepares to liquidate.
The Defiance Digital Revolution ETF (ticker NFTZ), which launched in late 2021, will close at the end of February, according to a press release. The fund, which tracked blockchain-related companies and an NFT index, will begin liquidating the portfolio around February 16.
“The fund failed to attract assets,” said Sylvia Jablonski, CEO and CIO of Defiance ETFs.
Its demise comes as hype about digital assets fades dramatically as prices fall and investors no longer flock to things like Bitcoin, decentralized finance, NFTs and other crypto-centric things that had gathered interest during the early pandemic years.
Interest in NFTs, which allow holders of art and collectibles to track ownership, increased during 2021 as cryptocurrencies surged. But a more hawkish Federal Reserve has created a highly prohibitive environment for speculative assets, leading to a plunge in digital token prices. Bitcoin, the largest crypto by market cap, is currently trading around $23,150, down from close to $69,000 at the end of 2021.
NFTZ, which did not invest directly in cryptocurrencies, ends January with roughly $5.3 million in assets, compared with nearly $14 million at its peak in March 2022, data compiled by Bloomberg show.
Other crypto-related ETFs are also closing as the industry braces in the wake of a series of scandals and bankruptcies. The implosion of the FTX empire left investors scrambling and saw some of the world’s most important players fall. Launches worldwide for exchange-traded products focused on digital assets have slowed to a trickle.
Read more: Crypto product pipeline breaks as survival questioned
“When you start to hit the crypto winter that we’re in, it makes sense that a lot of the investments that are based on that whole segment will start to dry up,” said Shawn Cruz, chief trading strategist at TD Ameritrade. “You need some sort of baseline of investor interest in your ETF, fund, whatever it is — otherwise it’s not worth the headache of trying to keep it going. It just doesn’t make sense from a business standpoint.”
–With help from Sam Potter.
