Defiance is bringing NFTs, which are usually relegated to the blockchain, to the stock exchange. The Defiance Digital Revolution ETF (NFTZ) tracks NFTs through an exchange-traded strategy, effectively giving retail investors the opportunity to profit off of NFTs without actually having to buy them.
Here's all you need to know about NFTZ, including how it tracks NFTs and whether it's ready for the market.
NFTZ listed on the NYSE American.
NFTZ launched on the NYSE American stock exchange as an ETF on Dec. 2. The fund is a basket of securities and tracks the BITA NFT and Blockchain Select Index.
Underlying assets include NFT marketplaces and issuers like Coinbase (NASDAQ:COIN) as well as other parts of the NFT, blockchain, and cryptocurrency landscapes. The index rebalances quarterly so investors can expect specific holdings to shift over time. Rules for the index include allowing companies that have at least one test case (or have one in the works) for NFTs, crypto trading, crypto mining, crypto banking, and other blockchain technology.
NFTZ's IPO performance isn't surprising.
Since launching on Dec. 2, NFTZ has dropped 7.18 percent as of mid-morning on Dec. 3. That isn't surprising—the overall market is in a slump as the omicron variant of the COVID-19 virus starts to spread throughout the U.S. and economic concerns are bubbling. The tech-heavy Nasdaq Composite Index dropped by more than 300 points since the market opened on Dec. 3.
NFTZ hit retail investors at $24.10 per share and is currently trading at $22.00.
What are NFTZ's top holdings?
At launch, NFTZ holds 34 stocks. The expense ratio is on the higher side at 0.65 percent, but that's normal considering the fund's niche thematic exposure.
NFTZ's top holdings include:
Silvergate Cap Corp. (SI) - 6.75 percent of the fund's weight
Plby Group Inc. (PLBY) - 5.72 percent of the fund's weight
Cloudflare Inc. (NET) - 5.36 percent of the fund's weight
Northern Data Ag (NB2 GR) - 5.08 percent of the fund's weight
Marathon Digital Holdings Inc. Com (MARA) - 4.74 percent of the fund's weight
NFTZ's other top holdings are Coinbase, Cleanspark, eBay, Argo Blockchain, and Defi Technologies.
Should you invest in NFTZ?
Similar to Cathie Wood's Ark Invest, Defiance ETFs are focused on innovation. The NFTZ fund stems from a desire to help everyday investors capitalize on a fast-growing asset class. "In October, all time NFT trading volume surpassed $15 Billion," Defiance co-founder Sylvia Jablonski said in a press release.
Due to the fund's concentration on crypto and the blockchain (even if not through direct NFT ownership), NFTZ will likely experience more volatility than other thematic ETFs. However, it could be an easy way in for NFT-hesitant investors. While FOMO ("fear of missing out") shouldn't necessarily be an investor's driving force, it can help you take chances that you might otherwise avoid due to heightened risk.
NFTZ's long-term outlook isn't certain, but investing a small percentage of your portfolio in the fledgling fund won't sink your overall returns.