In the latest sign that NFTs are rapidly morphing into a new type of bond, an index fund has hit the market, and CryptoPunks and Bored Apes are firmly in charge.
On December 17th, Bitwise Asset Management, a leading cryptocurrency index fund manager with more than $1.7 billion in assets under management, 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 easy for investors to own the 10 most valuable non-fungible token collections by weighting and selecting collections based on their market capitalization and minimum prices. The product, similar to stock index funds, is rebalanced quarterly.
Iconic Blue Chips
CryptoPunks represent 37.5% of the index and Bored Ape Yacht Club accounts for 29.7%. The remaining third include Veefriends, Autoslyphs, Fidenza, Cyberkorgz Genesis, Cool Cats, Meebis and Chromie Squiggle with between 5.4% and 2.5% each.
“The goal: to own today’s iconic blue-chips and add those that will emerge in the future,” said Hougan.
The product will exclude NFT collections that have less than 100 tokens due to illiquidity, as well as NFTs that represent music rights, virtual lands and game items. “The focus is on the arts and collectibles,” added Hougan.
Hougan said NFTs are positioned “at the forefront of innovation in digital assets” and are “quickly becoming valuable artifacts of our new digital age.” 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 non-fungible token industry, financialization of NFTs is moving rapidly, with venture capital firm Three Arrows Capital teaming up with centralized cryptocurrency firm Nexo to allow tokens from major NFT collections to be used as collateral for digital asset loans.
Companies began accepting applications for their new NFT Lending Desk on Dec. 16, announcing that Bored Ape Yacht Club and CryptoPunks will be supported. Additional supported collections will be announced in the coming weeks.
Users will be able to order stablecoins, Ether and other digital assets worth up to 20% of their NFT guarantee value. The loan desk will not impose settlements on loans before their maturity, “even if the value of your NFT fluctuates during the course of the loan.”