Bitwise's HYPE ETF Aims to Legitimize DeFi's Role in Mainstream Finance

Bitwise Investment Advisers has filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) for an exchange-traded fund (ETF) that would provide direct exposure to Hyperliquid’s native token, HYPE. The proposed fund, structured as a Delaware statutory trust, will be physically backed by HYPE tokens and custodied by Coinbase Custody Trust Company. Unlike futures-based products, the ETF will not involve derivatives or leverage, aligning with the mechanics of existing spot Bitcoin and Ether ETFs. Shares will be created and redeemed in large blocks by authorized participants, with the net asset value (NAV) tied to HYPE’s daily price. The SEC’s recent approval of in-kind creation and redemption mechanisms for crypto ETFs is expected to enhance efficiency and reduce costs for investors.

Hyperliquid, a Layer 1 blockchain designed for decentralized finance (DeFi) applications, has gained prominence for its perpetual futures trading capabilities. The HYPE token, which facilitates fee discounts and governance, has a circulating supply of 270.8 million tokens and a market capitalization of $11 billion, ranking it as the 21st-largest cryptocurrencyThe Block^[1]. However, the token has faced volatility, with a 11% decline in the 24 hours preceding the ETF filingThe Block^[1] and a subsequent 4% rebound to $42.50 following the announcementBlocknews.com^[2]. Analysts view the ETF as a milestone for decentralized perpetuals platforms, potentially expanding HYPE’s liquidity and legitimizing it as a non-Bitcoin, non-Ethereum asset in the ETF conversationBlocknews.com^[2].

The filing occurs amid heightened competition among decentralized exchanges (DEXs) offering perpetual futures. Hyperliquid’s 24-hour trading volume recently fell to $10.1 billion, while newcomer Aster, a BNB Chain-based DEX, reported $35.8 billion in volume over the same periodThe Market Periodical^[5]. Aster’s native token, ASTER, has surged over 2,000% in a week, driven by features like hidden orders and multi-chain support. This shift reflects broader market dynamics, with DEXs collectively processing $67.1 billion in on-chain perpetual futures volume on September 25, 2025SEC Newsroom^[7]. Hyperliquid’s market share has eroded as traders migrate to platforms offering MEV-mitigation tools and innovative incentivesBeInCrypto^[6].

Regulatory developments have also reshaped the crypto ETF landscape. The SEC’s July 2025 approval of in-kind creation and redemption for crypto ETPs marks a departure from earlier cash-only models, reducing operational friction and tax inefficiencies for institutional investors. Bitwise’s HYPE ETF filing leverages this framework, positioning the product to align with standard practices for commodity-based ETFs. The SEC’s broader agenda includes streamlining approvals for crypto products, with new generic listing standards eliminating the need for individual assessments if assets have traded for six months on CFTC-regulated exchangesThe Market Periodical^[5].

The proposed ETF underscores Bitwise’s role as an innovator in crypto asset management, expanding access to non-traditional tokens for institutional and retail investors. For Hyperliquid, the fund could accelerate adoption by bridging DeFi-native assets with Wall Street infrastructure. However, SEC approval remains uncertain, as the regulator has delayed decisions on multiple altcoin ETF proposals, including Canary’s spot SUI and PENGU fundsThe Block^[1]. Meanwhile, the surge in DEX activity—driven by platforms like Aster and Hyperliquid—highlights the sector’s growth potential and the need for regulatory clarity to sustain momentumETF.com^[8].