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Bitwise launches indexed fund tracking high profile NFTs

21:35, 16 December 2021

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A rendering of a Bored Ape NFT
Bitwise NFT Index Fund offers NFT exposure - Photo: Shutterstock

Bitwise launched an investment fund (ETF) that tracks an index consisting of high-profile and liquid digital art collections, known as “Blue Chip” non-fungible tokens (NFTs).

The Bitwise Blue-Chip NFT Index Fund will purchase and hold individual NFTs from ten of the largest collections weighted by market capitalisation. The fund will track a new Bitwise Blue-Chip NFT Collections Index, consisting of top-tier names in the sector, such as Autoglyphs, Bored Ape Yacht Club, CryptoPunks, Fidenza, VeeFriends, among others.

The fund is open only to accredited investors via a Regulation D private placement with a $25,000 minimum buy in, subject to monthly fund-level restrictions and a six-month lock-up period. Bitwise intends to list the fund’s shares through OTCQX.

Roughly 82.1% of the fund’s NFT holdings consist of five of the highest profile NFT collections, with CryptoPunks (37.4%), Bored Ape Yacht Club (29.7%) and Mutant Ape Yacht Club (5.73%) making up the top three holdings.

 

Bitwise NFT Index Fund portfolio allocationsPhoto: Bitwise

About Bitwise

San Francisco, California-based Bitwise is a cryptocurrency and digital asset manager with $1.6bn (£1.2bn) in assets under management, including crypto-indexed funds tracking Bitcoin, Ether and decentralised finance. Investors in Bitwise include Blockchain Capital, Coinbase, General Catalyst and Highland Capital Partners.  

“New frontiers in art are rare. Entirely new artistic mediums are even rarer,” said Bitwise CIO Matt Hougan. “The Bitwise Blue-Chip NFT Index Fund seeks to give these investors simple, diversified access to the digital art market’s most valuable collections in a meaningful way.”

The Bitwise Blue-Chip NFT Collections Index, created and maintained by the Bitwise Crypto Index Committee, will track NFT collections meeting certain qualifications set forth by the Committee.

Current qualifications include cryptographically secured digital assets whose ownership is recorded on a blockchain, classification as “arts and collectables” in the opinion of the Committee, be part of a larger single and identifiable collections consisting of at least 100 related NFTs and is freely traded.

These qualifications exclude rare, and mostly illiquid, “one-of-one” mintings.

The index will use an adjusted floor price to value the NFT basket, based on the lowest trade price recorded over an exchange within a particular collection. This approach offers a more conservative price estimate than pegging to the more valuable, rarer and more illiquid individual NFTs within a collection.

NFT 'Floor Price' valuations

Floor NFTs have significantly higher liquidity than rarer members of a collection, reads the funds governing documents. “Leading NFT collections will experience relatively large numbers of floor transactions…while rarer NFTs in those collections may not trade for weeks, months or years at a time.”

Bitwise sets a one-tenth value estimate for “floor NFTs” in relation to the rarer, more expensive NFTs in any given collection, allowing the Bitwise Index Committee to adjust prices monthly, based on recent trades, calling floor prices a proxy for the pricing trends of a collection overall.

The floor price will be calculated quarterly, based on publicly available data on a trailing 30-day basis. Floor trades are defined as a trade at a price within a 10% band of the previous hour’s reported floor price.  

Read more: Bored Ape NFT lots sell at auction for $24.4m, $1.8m

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