tl;dr
Crypto asset manager 21Shares filed an S-1 with the SEC for the first U.S.-listed leveraged ETF tied to a DeFi protocol, Hyperliquid (HYPE). The 2x Long HYPE ETF would use derivatives to offer double exposure to HYPE, bypassing direct token ownership. A separate S-1 for an SEI-tracking ETF was also ...
**21Shares Files for First U.S.-Listed Leveraged ETF Tied to DeFi Protocol**
*New 2x Long HYPE ETF Aims to Offer Double Exposure to Hyperliquid, While Also Submitting S-1 for SEI-Tracking Fund*
Crypto asset manager 21Shares has taken a significant step toward expanding its product lineup by filing an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC). The proposed fund, the **21Shares 2x Long HYPE ETF**, would be the first leveraged exchange-traded fund (ETF) in the U.S. linked to an active decentralized finance (DeFi) protocol, specifically Hyperliquid (HYPE). If approved, the ETF would offer investors amplified exposure to the performance of HYPE, a token tied to the Hyperliquid decentralized perpetual futures platform.
### How the 2x HYPE ETF Works
The ETF’s structure relies on derivative instruments such as swap agreements and options to replicate twice the daily returns of HYPE, before fees and expenses. Unlike traditional crypto ETFs that hold underlying assets, the 2x HYPE ETF will not directly own HYPE tokens. Instead, it will mirror the on-chain dynamics of the Hyperliquid network, including its perpetual futures trading mechanisms and fee structures.
A key feature of the fund is its **daily reset mechanism**, a common characteristic of leveraged ETFs. This process adjusts the fund’s exposure to maintain its 2x target, ensuring alignment with HYPE’s daily performance. The derivative-based approach also aims to mitigate custody risks associated with holding volatile crypto assets directly.
### Creation, Redemption, and Oversight
The ETF’s shares will be created or redeemed by Authorized Participants (APs), who may transact in cash or in-kind. Cash transactions will involve designated **HYPE Counterparties**, independent third parties responsible for buying or selling HYPE on behalf of the Trust. 21Shares will conduct due diligence on these counterparties, evaluating their financial stability and regulatory compliance.
For cash-based creations, HYPE Counterparties will purchase equivalent HYPE tokens and deposit them with approved custodians. Redemptions will reverse this process, with HYPE sold at the "Pricing Benchmark" rate, and proceeds settled in cash. APs will bear any slippage or trading costs incurred during these transactions.
The ETF’s continuous offering is registered under the **Securities Act of 1933** and is set to remain active for three years. Notably, the Trust will not be registered under the **Investment Company Act of 1940** or fall under the jurisdiction of the **Commodity Futures Trading Commission (CFTC)**, distinguishing it from traditional structured products.
### A Pioneering Move for DeFi and Crypto ETFs
If approved, the 2x HYPE ETF would mark a milestone in the evolution of crypto investment products, bridging traditional finance with DeFi. By leveraging derivatives to track a DeFi protocol’s performance, 21Shares is addressing demand for more sophisticated tools to access the growing decentralized finance ecosystem.
In a separate filing on the same day, 21Shares also submitted an S-1 for an **SEI-tracking ETF**, referencing CF Benchmarks as its pricing index provider. This suggests the firm is actively exploring multiple avenues to expand its ETF offerings in the crypto space.
### Implications and Next Steps
The SEC’s approval of the 2x HYPE ETF would signal a growing acceptance of crypto-linked financial products within the U.S. regulatory framework. However, the fund’s structure—relying on derivatives and third-party counterparties—may raise questions about transparency and risk management. Investors will likely scrutinize the fund’s methodology, fee structure, and the reliability of its HYPE Counterparties.
As the crypto market continues to mature, innovations like the 2x HYPE ETF could play a pivotal role in attracting institutional and retail investors seeking exposure to DeFi assets through familiar financial instruments. For now, 21Shares’ filings represent a bold move toward integrating blockchain technology with traditional capital markets.