NFT ETF Rumors: A Glimpse into the Challenges

Rumors about an exchange-traded fund (ETF) tracking top NFT collections are circulating, sparked by a social media post from Pudgy Penguins CEO Luca Netz. However, ETF issuers and market experts told Decrypt that a fund is unlikely due to traditional investors perceiving NFTs as “nonsense.”

In the context of a rumored U.S. crypto reserve following President Trump’s announcement, NFT enthusiasts speculated on the possibility of an NFT reserve. Netz fueled this speculation by tweeting about working on “something for our JPEGs.”

Despite this excitement, experts expressed skepticism. James Butterfill from CoinShares stated that an NFT ETF faces significant technical and structural challenges because of the illiquidity of NFTs, which complicates price discovery and market-making—similar to why real estate ETFs are scarce.

Ryan Rasmussen from Bitwise Asset Management noted the need for pricing methodologies since NFTs are not uniformly priced. He emphasized that the lack of liquidity complicates entering and exiting positions without affecting market prices, although he sees it as “possible.”

ETFs are designed to increase liquidity in an asset class, and current U.S. Bitcoin ETFs manage $103.8 billion, attracting investors unlikely to invest in crypto otherwise. However, Rasmussen argued that the demand for NFTs remains low, particularly from traditional investors, who are still wary after the NFT market downturn post-2021.

Chris Akhavam of the NFT marketplace Magic Eden suggested that the prospect of an NFT ETF may improve with the sector’s future growth, but current market conditions lack the liquidity necessary to support an ETF.

Experts from Hong Kong’s HashKey also indicated that NFT ETFs are more likely a long-term consideration rather than an immediate reality, as the market is still evolving.

Nonetheless, the idea of an NFT ETF excites market participants, as it could lend legitimacy and foster growth in a currently beleaguered asset class. Akhavam remarked that announcements regarding an NFT ETF would likely spur significant buy demand, validating the asset class and enhancing NFT liquidity and market caps.

Edited by Stacy Elliott.