Using a spoon or cookie scoop, scoop a 1-inch ball out of the center of each cupcake. Reserve these pieces of cake for sprinkling crumbs on top of the cupcakes as garnish.
Using 1 cup Nutella, spoon a rounded teaspoonful of Nutella into the center of each cupcake.
In a large mixing bowl, beat butter until creamy.
Add powdered sugar, vanilla, and remaining Nutella, beating until light and fluffy, 2-3 minutes.
The frosting should be thick, but fluffy and pipeable. You can add a tablespoon or two of water, if needed, to adjust the consistency.
Pipe frosting onto cupcakes.
Sprinkle with red velvet cake crumbs, for garnish.