Experts Suggest NFT ETF Unlikely as Investors Remain Skeptical

Experts dismissed speculation about an upcoming NFT ETF, stating that traditional investors still view the asset class as "nonsense."

Speculation about an NFT-focused ETF has emerged following a social media post by Pudgy Penguins CEO Luca Netz. However, ETF issuers and market analysts told Cryptoscoop that such a fund is unlikely anytime soon, as many traditional investors still view NFTs as speculative or impractical.

Following President Donald Trump's announcement about a potential U.S. crypto reserve, some NFT enthusiasts questioned whether an NFT reserve could also become a reality. Netz fueled the discussion by retweeting the idea and hinting that he was working on “something for our JPEGs,” leading to further speculation about an NFT ETF.

Despite the buzz, industry experts remain skeptical. James Butterfill, Head of Research at CoinShares, noted that NFTs' illiquidity presents a major obstacle, making price discovery and market-making extremely difficult, much like the challenges seen with real estate ETFs.

Ryan Rasmussen, head of research at Bitwise Asset Management, explained that launching an NFT ETF would require overcoming significant technical hurdles, particularly in establishing pricing methodologies since NFTs lack uniform pricing. He cited Bitwise’s NFT index as an example of how such a structure could work.

Another major challenge is illiquidity, which makes it difficult for ETF issuers to enter or exit positions without disrupting the market. Despite these obstacles, Rasmussen believes an NFT ETF is possible, though complex to implement.

The core purpose of an ETF is to bring liquidity to a market or asset class. For instance, U.S. spot Bitcoin ETFs now manage $103.8 billion in assets, according to CoinGlass, and have consistently seen billions in daily trading volume since their launch in October. However, Rasmussen noted that NFTs lack the same level of investor demand, making an NFT ETF far less viable at this time.

"From my experience, the conversations we're having are still stuck in the post-2021 NFT bust headlines," he said. "The idea that traditional investors are eager to gain exposure to NFTs through an ETF seems unlikely to me."

Chris Akhavam, Chief Business Officer at NFT marketplace Magic Eden, believes the likelihood of an NFT ETF will increase when the sector experiences its next major growth phase. However, he pointed out that the current market lacks the liquidity needed to handle the additional demand such a fund would generate.

"I think the chances of an NFT ETF passing this year are very low, or unlikely to happen at all," Rasmussen told Decrypt. "Most investors today still see NFTs as nonsense. That’s not my personal view, but it's a sentiment I hear often."

Hong Kong-based ETF provider HashKey shared a similar outlook, telling Decrypt that NFT ETFs are more of a long-term possibility rather than an immediate reality, as the market is still evolving.

That hasn’t stopped market participants from holding onto hope.

An NFT ETF could lend legitimacy to the sector and potentially drive growth, much like Bitcoin and Ethereum did before their ETF approvals, following a decline from the asset class’s 2021 highs.

“An NFT ETF would be viewed as extremely bullish for the space,” Akhavam said. “I’d expect significant buy demand for NFTs following any ETF announcement, as investors would see it as a major validation of the asset class. This could lead to substantial growth in NFT liquidity and market capitalization.”