ETF-ization Comes to DeFi: 21Shares Files HYPE ETF

The news, and why it matters now

On October 29, 2025, 21Shares filed to list a HYPE token exchange-traded fund in the United States. The proposal would wrap HYPE, the native token of the Hyperliquid derivatives network, in a structure familiar to traditional investors. The filing follows a year of steady progress on non-Bitcoin and non-Ether products and lands just as the Securities and Exchange Commission faces clustered fall deadlines on spot Solana and other altcoin ETFs. This is not just another ticker. It signals that the exchange-traded fund wrapper is moving deeper into decentralized finance.

The first-order effect is attention. An exchange-traded fund takes an on-chain asset and packages it for retirement accounts, financial advisers, and institutions that cannot or will not hold tokens directly. The second-order effect is flow. If approved, authorized participants would create and redeem shares against underlying HYPE, pulling inventory from centralized exchanges and, in time, from on-chain venues that hold liquidity. In short, the filing starts a timer for a phase shift in how capital moves between traditional finance and DeFi. For the event itself, see Reuters confirms HYPE ETF filing. For context on market-structure shifts in the United States, revisit Kraken’s onshore derivatives pivot.

The ETF wrapper, explained by the plumbing

Think of an exchange-traded fund as a two-door warehouse. In the front, everyday investors trade shares on a stock exchange during market hours. In the back, large trading firms called authorized participants deliver a basket of assets to the fund sponsor and receive new shares, or return shares to receive the basket back. For crypto, the basket is the token. The back door is where the tokens enter or exit the warehouse.

When there are more buyers of the shares than sellers, shares trade at a small premium and authorized participants step in to create more shares by acquiring tokens. When there are more sellers, shares trade at a small discount and participants redeem shares for tokens, then sell the tokens. Those micro incentives keep the share price close to the value of the underlying tokens and they dictate how liquidity is sourced.

For Bitcoin and Ether, market makers source coins mostly from centralized exchanges and custodians, sometimes via over-the-counter desks. For a DeFi-native token like HYPE, sourcing eventually extends on-chain, because the deepest liquidity and utility may live in native pools or in staking contracts. That means exchange-traded fund flows can both siphon liquidity from DeFi in the short run and recycle it back through staking, treasury operations, and arbitrage in the medium run.

Siphon and recycle: a practical map of the flows

Here is how the first months can play out if the HYPE ETF and similar products launch:

Primary market creation. An authorized participant receives an order to create shares. To hedge their exposure, they may short perpetual futures while buying spot HYPE. If centralized exchange order books are thin, they route to on-chain liquidity pools or request block liquidity from large holders who can deliver on-chain. This siphons tokens from venues that previously supported DeFi activity.
Secondary market settlement. Investors buy the ETF shares, which does not directly touch the token after the initial creation. But when shares trade at a premium, more creations pull more HYPE. When shares trade at a discount, redemptions push HYPE back into circulation.
Recycling through staking and treasury. If the fund prospectus permits, the issuer may stake a portion of the underlying and pass through net rewards to shareholders or use them to offset fees. If staking is not permitted, affiliated entities may still run staking strategies against inventory held during creation and redemption windows, or market makers may stake between hedge adjustments. In both cases, staking injects tokens back into on-chain contracts, adding utility and yield even though the initial pull was out of DeFi pools.
Arbitrage loop. As differences appear between the ETF price, the spot token, and the perpetual futures price, arbitrageurs trade across centralized exchanges, the ETF, and on-chain pools. Each loop brings inventory back and forth, which is the recycle. Over time, the market finds a new balance of depth across venues.

The key point is not that exchange-traded funds drain DeFi. The point is that they rearrange where inventory sits during market hours and who holds the basis risk, which is the price gap between spot and derivatives.

Four market-structure fault lines to watch

Custody concentration. Most issuers depend on a small set of custodians for secure token storage. If two or three providers anchor the category for HYPE, Solana, XRP, and others, operational practices at those firms become systemically important. Expect more audits, more segregated accounts, and more insurance layers. Concentration can be a risk if one provider faces a technical incident.
Staking inside regulated wrappers. The United States has been cautious about staking within exchange-traded funds. Even if a prospectus initially prohibits staking, competitive pressure from offshore and European exchange-traded products tends to push issuers toward creative structures that allow some staking economics to flow to shareholders. If that happens, validator selection and slashing risk move into mainstream investment products, with real implications for how networks decentralize their security.
Liquidity location. Today, HYPE and Solana trade with meaningful depth on centralized exchanges and, for HYPE in particular, on its native Hyperliquid venue. Exchange-traded funds shift part of the intraday price discovery to the listed share during New York hours. Liquidity becomes shallower overnight, then returns at the open. That time zone rhythm can increase volatility for on-chain traders who hold inventory through the close.
Perpetual futures basis. Market makers that create shares often hedge with perpetual shorts. When creation is heavy, the perpetual funding rate can swing more negative as shorts pile up. When redemptions dominate, the basis can flip positive. If the exchange-traded fund trades only during market hours but perps run 24 hours, funding and basis can seesaw in ways that stress levered traders between 4 pm and the reopen.

The broader hook: the SEC’s altcoin clock

This filing lands in a month packed with Securities and Exchange Commission deadlines for non-Bitcoin and non-Ether products, including Solana. The context also includes a mid-September Commission vote that allowed national exchanges to adopt more generic listing standards for certain commodity and crypto products, which reduced the need for case-by-case approvals and set the stage for the first non-Bitcoin and non-Ether launches in late October. That shift was highlighted in Reuters on SEC listings vote. For parallel policy momentum abroad, see the UK move on tokenised funds.

The near-term read-through is simple. Exchange-traded funds for non-Bitcoin and non-Ether assets are now in the queue with clearer procedural paths, even if the Commission still staggers decisions. The medium-term read-through is more interesting. Once two or three non-Bitcoin and non-Ether products list and trade for a quarter, data on spreads, tracking error, and custody events will drive a second wave of filings. That is when DeFi-specific tokens get a real shot.

What this could do to Solana-class ecosystems

Solana sits at the front of the non-Bitcoin and non-Ether line. If a spot exchange-traded fund launches, two changes happen quickly. First, new buyers arrive who want exposure but cannot self-custody. Second, market makers must source or borrow Solana to create shares, then hedge with futures. The sourcing draws from centralized exchange inventories and wrapped pools on-chain. The hedging puts pressure on perpetual funding. Validator economics may become a headline issue. If funds do not stake, the share class could trade at a slight fee drag compared with self-custody. If they do stake, investors will begin comparing validator performance inside a traditional fund to on-chain alternatives, including liquid staking tokens.

HYPE is different but rhymes. Hyperliquid is a derivatives-native network, and the token is tied to the economics of the venue, including potential buybacks and fee distributions subject to its design. An exchange-traded fund channel would turn those cash flows into a packaged equity-like exposure for traditional accounts, while leaving on-chain users to decide whether to hold the token directly for governance, staking, and fee benefits. The two audiences are complementary, not identical.

Six to twelve month outlook: three scenarios

Base case, 55 percent. A handful of non-Bitcoin and non-Ether exchange-traded funds, including at least one Solana product, list over the next two quarters. Daily turnover stabilizes in the low billions across the new funds. Spreads tighten to a few basis points at the open and close, wider midday. Perpetual funding oscillates but stays within historic ranges. Custody remains concentrated, with two providers controlling the majority of assets. Staking remains limited in the United States, but issuers explore pass-through models and hint at pilot programs in 2026.
Upside case, 25 percent. The SEC green lights multiple products in close succession and issuers roll out in-kind creation, which lets market makers deliver tokens instead of cash. This reduces friction and allows more on-chain sourcing. A major issuer introduces a compliant staking share class, passing through net rewards after fees. This sparks a race among validators to meet institutional requirements, and a measurable share of on-chain staking migrates toward institutional-grade operators. Perpetual funding turns structurally less negative as hedgers rely more on in-kind creations rather than short perps.
Downside case, 20 percent. A procedural delay or a court challenge pushes key decisions into 2026. Liquidity fragments across look-alike tickers in Canada and Europe while United States funds wait. Centralized exchange borrow becomes tight for popular tokens, basis blows out on the short side during risk-off weeks, and several DeFi venues see temporary depth drain as market makers warehouse inventory for expected creations that arrive later than planned.

Likely winners if the ETF flow regime takes hold

Custodians with token breadth and compliance muscle. Firms that already handle spot Bitcoin and Ether custody and can add Solana, HYPE, and others with institutional controls will capture flows. They will also set the rules for deposit addresses, chain updates, and slashing insurance where staking is permitted. For banking-rail context, see OCC’s reopening of crypto rails.
Layer 2s and Layer 1s with deep centralized exchange bridges. Networks that can move collateral cheaply and quickly to and from centralized exchanges will gain market share. Solana already benefits from high throughput and active centralized exchange connectivity. Ethereum Layer 2s like Base and Arbitrum have the advantage of native integration with dominant DeFi protocols and a large market maker base.
Oracle networks and MEV infrastructure. As price discovery spreads across exchange-traded funds, centralized exchanges, and on-chain pools, robust price feeds become critical. Chainlink and Pyth are well positioned. On the arbitrage side, searchers and builders that can capture cross-venue opportunities without harming users will prosper.
Market makers and clearing firms with crypto-native tooling. The firms that can price creation and redemption in real time, hedge across perps and options, and settle tokens on-chain with minimal failed transactions will own the spread.

Key risks to monitor

Regulatory delays and stop-start headlines. A short government shutdown or internal Commission workload can push decision dates. Issuers can be ready, but without a published approval a launch cannot proceed. Be prepared for windows that suddenly open and close.
Liquidity fragmentation. When a new exchange-traded fund launches, attention concentrates in the listed shares during U.S. hours. Some on-chain pools may see thinner depth and wider slippage, especially around the close. Smart order routing becomes more important.
Basis blowouts. If creations are cash only and hedging relies on short perpetuals, the funding rate can swing sharply during heavy inflows or outflows. Levered traders who hold positions through the 4 pm close need risk buffers.
Custody concentration and operational risk. Two or three large custodians are efficient, but they create single points of failure. Token upgrades, chain halts, or staking incidents would ripple through exchange-traded funds quickly.
Tracking and governance gaps. Exchange-traded funds may hold tokens without participating in governance or may vote conservatively. Protocols that depend on active governance from large holders could see reduced participation unless issuers adopt transparent policies.

Builder and trader checklist to position for the new regime

For builders:

Simplify the centralized exchange bridge. Make it effortless for market makers to move collateral on and off-chain. Support fast finality, predictable fees, and institutional-grade monitoring. Publish integration guides that translate directly into maker scripts.
Prepare staking for institutional use. If your token supports staking, document validator risk, slashing policies, and reward cadence. If exchange-traded funds cannot stake today, they may in the future or their affiliates may. Make the path clear now.
Harden oracle and data infrastructure. Provide redundant feeds and clear failover logic. Integrate with at least one major oracle network and one emerging alternative. Track latency during market open and close and publish metrics.
Design for predictable governance. If large exchange-traded funds end up holding a material share of supply without voting, adjust quorum assumptions or build delegated voting that preserves decentralization.
Court market makers, not just users. Offer testnet credits, dashboards, and private endpoints that let authorized participants simulate creations and redemptions against your token’s liquidity. Show where depth sits and how it replenishes.

For traders:

Map the basis. Track the spread between the ETF share price, spot token, and perpetual futures during the first two weeks of trading. Expect the widest dislocations at the open and close. Use alerts and cut leverage into those windows.
Respect settlement calendars. Exchange-traded funds typically settle on T+1 or T+2. Perps settle every funding interval. Coordinate your hedges so that funding shocks do not hit when your share settlement is pending.
Diversify custody paths. If you plan to deliver tokens for in-kind creations or to unwind redemptions, have accounts at more than one custodian and more than one centralized exchange. Practice small transfers during quiet hours.
Segment strategy by venue. Run intraday arbitrage between the exchange-traded fund and perps during market hours, then switch to on-chain relative value when the share market is closed. Do not force a 24-hour strategy on a 6.5-hour instrument.
Watch validator and staking policy. If an issuer introduces staking, understand which validators they use, how slashing is handled, and how rewards flow to shareholders. Adjust your on-chain positioning to avoid crowding.

The deeper shift

The exchange-traded fund wrapper does not replace DeFi. It changes the access points. For many investors, it is a bridge that converts tax statements and custody risk into familiar forms. For networks, it is a new channel that can fund validators, deepen derivatives markets, and invite arbitrageurs who think in basis points rather than memes. The 21Shares HYPE filing is a clear marker of that shift. If the SEC’s altcoin calendar keeps moving, the next six to twelve months will be defined by how well builders prepare for regulated demand and how quickly traders adapt their playbooks to the warehouse with two doors.

The goal is simple. Build networks that welcome exchange-traded fund flows without starving the on-chain economy. If we get the plumbing right, ETF-ization will not drain DeFi. It will turn it into a larger, faster circuit where capital can safely enter, do useful work, and exit again.