In the latest sign that NFTs are rapidly morphing into a new type of security, an index fund has hit the market, and CryptoPunks and Bored Apes are firmly in charge.
On Dec. 17, Bitwise Asset Management, a leading crypto index fund manager with more than $1.7B in managed assets, launched the Bitwise Blue-Chip NFT Index Fund. Matt Hougan, the firm’s Chief Investment Officer (CIO), says it is the first fund of its kind. But it will only be available to accredited investors, with a minimum investment size set at $25,000.
The index fund is designed to make it easier for investors to own the top 10 most valuable nonfungible token collections, weighting and selecting collections based on their market capitalization and floor prices. The product, which is similar to equity index funds, rebalances quarterly.
Iconic Blue Chips
CryptoPunks comprise 37.5% of the index and Bored Ape Yacht Club accounts for 29.7%. The remaining third includes Veefriends, Autoslyphs, Fidenza, Cyberkorgz Genesis, Cool Cats, Meebis, and Chromie Squiggle with between 5.4% and 2.5% each.
“The goal: Own the iconic blue-chips of today, & add those that emerge in the future,” said Hougan.
The product will exclude NFT collections that feature less than 100 tokens due to their illiquidity, in addition to NFTs representing music rights, virtual land, and game items. “The focus is on arts & collectibles,” Hougan added.
Hougan said NFTs are positioned “at the edge of crypto innovation” and are “rapidly becoming prized artifacts of our new digital era.” However, he also highlighted the risks associated with the nascent sector. The market is volatile, liquidity can be challenging, and custody is evolving,” he tweeted.
Despite the adolescence of the nonfungible token sector, the financialization of NFTs is moving fast, with VC firm Three Arrows Capital teaming up with centralized crypto lending company Nexo to allow tokens from top NFT collections to be used as collateral for digital asset loans.
The firms began accepting applications for their new NFT Lending Desk on Dec. 16, announcing that Bored Ape Yacht Club and CryptoPunks will both be supported. Additional supported collections will be announced in the coming weeks.
Users will be able to borrow stablecoins, Ether, and other digital assets worth up to 20% of the value of their NFT collateral. The lending desk will not impose liquidations on loans before their maturity, “even if the value of your NFT fluctuates during the course of the loan.”