In a significant move for the cryptocurrency market, 21Shares has officially filed with the U.S. Securities and Exchange Commission (SEC) for a 2x leveraged HYPE ETF. This innovative product is designed to deliver double the daily returns of the Hyperliquid Index, targeting traders eager to capitalize on the burgeoning on-chain activity surrounding Hyperliquid.
Bloomberg ETF analyst Eric Balchunas has remarked on the niche nature of this filing, suggesting it could yield impressive returns in the coming years, reminiscent of early booms in smart beta and currency-hedged products. If approved, this would mark the first U.S.-listed leveraged ETF tracking the performance of a live decentralized finance (DeFi) protocol, employing swaps instead of traditional custody to introduce new layers of funding and counterparty exposure.
Analysts project that initial capacity for the HYPE ETF could range from $500 million to $1.5 billion, influenced by liquidity conditions within HYPE markets. This filing follows 21Shares’ recent launch of its DOGE ETF on the DTCC platform, and earlier in Europe, it listed a HYPE exchange-traded product (ETP) on the SIX Swiss Exchange, providing institutional investors access without the need for wallets or on-chain custody.
Growing Competition in the Hyperliquid ETF Space
21Shares is not the only player in the race for Hyperliquid ETF listings. In September, Bitwise filed for an HYPE ETF designed to hold the native token directly, featuring in-kind creation and redemption options that allow shares to be swapped for HYPE tokens rather than cash. Meanwhile, VanEck has applied for a spot staking Hyperliquid ETF in the U.S., alongside a parallel ETP in Europe, hinting at potential integrations of staking yields and HYPE buybacks tied to fund performance.
This surge in interest from asset managers coincides with Hyperliquid’s increasing visibility in traditional finance. Recently, Paradigm backed an $888 million Nasdaq-listed fund to hold HYPE, offering institutions direct exposure without utilizing the exchange.
Hyperliquid’s Resilience and Remarkable Growth
Despite facing a staggering $10 billion market selloff, Hyperliquid has demonstrated resilience, continuing to operate effectively and even recording its strongest revenue month. This two-year-old decentralized exchange, developed by a compact team of 15 engineers in Singapore, has begun to outpace established platforms like Coinbase in several key metrics.
Dave Olsen, president of Jump Trading, referred to Hyperliquid as the first meaningful competitor to Binance during a Coinbase summit attended by executives from industry giants such as BlackRock. Utilizing its Hyperliquidity Provider (HLP) system, Hyperliquid boasts over $500 million in deposits, offering liquidity through an automated trading vault that continuously posts buy and sell quotes.
During the recent market turmoil, the HLP system generated $40 million in profit, while many traders faced significant losses. Hyperliquid’s innovative auto-deleveraging mechanism helped cushion the blow by absorbing losses from profitable positions.
The platform’s financial model relies on trading fees to facilitate buybacks of HYPE tokens, with the Assistance Fund amassing a substantial reserve of $1.4 billion for this purpose. Operating on a smaller scale than Ethereum, Hyperliquid maintains a network of 24 validators, while the Hyper Foundation controls nearly two-thirds of staked HYPE, granting it considerable governance influence.
Hyperliquid Labs has recently communicated to the U.S. Commodity Futures Trading Commission that its perpetual futures offerings meet and occasionally exceed U.S. market safeguards. Following the successful launch of the HIP-3 upgrade, qualified builders can now create perpetual futures markets without requiring centralized approval, further enhancing the platform’s appeal.
As of now, over 100 projects are actively being developed on Hyperliquid, as reported by DefiLlama. The new upgrade empowers affluent users to establish custom perpetual futures markets swiftly by staking millions in HYPE as collateral.
This unprecedented momentum in the Hyperliquid ecosystem signifies a pivotal moment for both 21Shares and the broader DeFi landscape as they navigate the evolving regulatory environment and market dynamics.
