Bitwise Asset Management has filed a registration statement with the U.S. Securities and Exchange Commission (SEC) to begin offering the Bitwise Hyperliquid ETF, which will hold the Hyperliquid (HYPE) token.
The HYPE token is the native token for Hyperliquid, a top decentralized exchange (DEX) specializing in perpetual futures trading, where HYPE is used for fee payment.
According to the registration statement, the Exchange Traded Fund (ETF) will provide “direct exposure to the value of HYPE”, because it is structured as a trust that holds HYPE.
While a trading exchange, ticker symbol, and management fees were not disclosed, this filing represents Bitwise’s latest approach to grow its involvement and satisfy investor demand in a rapidly expanding decentralized derivatives market.
Structure and Functionality of the Proposed ETF
The ETF being requested would be structured like the recently approved Bitcoin and Ether ETFs, whereby the ETF would hold the underlying digital asset directly, rather than trading futures contracts.
The fund’s filing states that the fund will allow for in-kind creation and redemption, also known as for “HYPE” tokens, so that institutional investors could exchange HYPE tokens for ETF shares rather than just cash settlements.
This, according to the sponsoring firm, has gained SEC approval earlier in the year to allow crypto in-kind product structure, which is touted as cost-efficient and convenient for issuers and the end users.
The ETF will provide traditional market participants with a beneficial regulated investment vehicle to obtain exposure to Hyperliquid without direct engagement with the DEX.
Regulatory Process and Approval Timeline
Bitwise submitted a filing via Form S-1 under the Securities Act of 1933 (the 33 Act) that regulates securities offerings. This is the first of several lengthy steps in the approval process.
The company will also need to submit an additional Form 19b-4, which will primarily serve to ask the SEC for approval to list and trade the ETF on an exchange. The review process can take up to 240 days.
Recently, however, the SEC has made it possible to approve crypto ETFs that are tied to assets traded on exchanges regulated by the Commodity Futures Trading Commission (CFTC).
Bitwise acknowledged in its filing that there are currently no Hyperliquid futures contracts available for the CFTC to regulate, which could create problems with the ETF’s approval processes.
Rising Competition from Aster Challenges Hyperliquid’s Dominance
The filing by Bitwise comes at a time of explosive growth for perpetual futures DEXs, as new entrants into the market push back on Hyperliquid’s lead.
Aster, a perpetual futures DEX native to BNB Chain, has experienced astronomical trading. On Thursday, Aster’s 24-hour trading volume was $35.8 billion, which was more than Hyperliquid’s volume of $10 billion, according to DefiLlama.
Open interest for the token Aster rose to $1.15 billion, up from only $143 million in open interest less than a week prior. In contrast, open interest in Hyperliquid’s HYPE token is down 1.85% to $2.2 billion, and HYPE’s price is down 3.5% to $42.5.
This market activity indicates that Aster’s rapid growth is creating headwinds for Hyperliquid; at the same time, Bitwise tries to create a regulated investment product that is tied to Hyperliquid’s token.
Also Read: Trust Wallet Partners With Aster To Add Perpetual Futures In 100+ Markets With Up To 100x Leverage
DEX Market Momentum Reaches New Highs
The increase in competition occurs during a time when the decentralized exchange market as a whole is seeing a lot of momentum.
Aster’s ASTER token experienced a 400% increase in price on September 18 as a result of the recent investment from YZi Labs, a firm co-founded by former Binance executive CZ, according to UnoCrypto.
On that same day, Hyperliquid’s HYPE token reached an all-time high of $59.30 due to a significant jump in trading. Even BNB reached an all-time high on that same day.
A week later, on September 24, we reported that Aster surpassed Circle in daily revenue, generating $8.56 million and only sitting behind Tether. ASTER also jumped to an all-time high of $2.33, aided by $2.75 billion in trading volume.
These events illustrate the intense competition developing in the perpetual futures DEX space, and an environment that could be conducive to more opportunity but also more volatility, as Bitwise continues with its Hyperliquid ETF proposal.