Defiance ETFs has launched a new thematic equity ETF providing exposure to blockchain and crypto economy companies including firms that are specializing in nonfungible tokens (NFTs).
NFTs commonly refer to digital art whereby ownership is recorded on the blockchain.
The Defiance Digital Revolution ETF (NFTZ US) has been listed on NYSE Arca with an expense ratio of 0.65%.
NFTs are unique financial securities that represent digital data. Ownership of an NFT is recorded on the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded.
NFTs have been praised as offering a new medium for creators to make money directly from their work by eliminating the need for costly middlemen such as agents.
NFTs are most commonly thought of as referring to digital art; however, their use cases are growing. There are currently NFTs representing music and media, collectible items such as trading cards, event tickets, virtual fashion, gaming avatars, and big sporting moments.
While interest in NFTs is expanding, the segment also has scores of critics who argue that this highly speculative asset class is just a craze promoted by celebrities and targeted at the ultra-wealthy. Whether NFTs will become more established, or the bubble will burst, remains to be seen.
Methodology
The ETF is linked to the BITA NFT and Blockchain Select Index which selects its constituents from a universe of developed market stocks with market capitalizations above $100 million and average daily trading volumes greater than $200,000.
The index targets blockchain and crypto economy companies through three avenues:
The first is to include firms with at least 50% revenue exposure to various crypto industry operations including mining, asset management, trading, banking, and payment processing, as well as companies that supply mining hardware or blockchain software and consulting services.
The second is to include companies that are holding more than $10 million in cryptocurrencies on their balance sheets either as an investment or for the preservation of value.
The third is to include companies providing services or funding for projects related to the issuance, creation, and commercialization of NFTs.
Index constituents are weighted by float-adjusted market capitalization while capping any individual security at 4%. Reconstitution and rebalancing occur quarterly.