Hyperliquid ETFs Are Here. Should Advisors Buy the HYPE?

The cryptocurrency market has officially moved into hyperdrive.

A new ETF from Grayscale Investments tracking the price of the cryptocurrency Hyperliquid, began trading last week, marking the third entry by a provider following 21Shares and Bitwise, which launched their own spot products earlier this year. Those two funds have raked in a combined $160 million since their mid-May launches. What makes Hyperliquid unique is that its coin, HYPE, reinvests a majority of its platform fees back into the product, as well as the fact that it has its own blockchain to process transactions quickly. Part of the excitement also stems from Hyperliquid’s startup status, said Joe Sticco, co-founder of Cryptex Finance.

He pointed to the massive size of the Nasdaq, Coinbase or the New York Stock Exchange that have thousands of employees, while Hyperliquid has just 11. “The question is: What happens when they get to 14 employees? What type of damage are they going to do?”

Liquid, Solid, Gas

Bitcoin has been in a major funk, but part of the reason is that one of its most influential buyers, Michael Saylor, sold millions of dollars worth of the cryptocurrency in late May. He has since started to buy the dip, but the downturn has been ongoing for the coin, as well as for Solana and Ethereum. SpaceX’s incoming IPO is also causing problems, Sticco said, since investors may be looking to free up capital for funds that invest in the space tech firm. It’s the combination of factors that has caused hyperliquid’s popularity to skyrocket, he added. “You’re having this triple effect [of bitcoin selloffs] taking place, Hyperliquid getting bigger and SpaceX going public, so everybody wants to have liquidity freed up for these events,” Sticco said. “Watching the outperformance of Hyperliquid, it’s been quite astonishing.”

Currently, there are three spot funds that invest directly in Hyperliquid:

• The Bitwise Hyperliquid ETF (BHYP), which has an expense ratio of 0.34%.
• The Grayscale Hyperliquid ETF (HYPG), which has the lowest fee of the three funds, at 0.29%.
• The 21Shares Hyperliquid ETF (THYP), which has an expense ratio of 0.3%.

21Shares also has a leveraged Hyperliquid fund, the 21Shares 2x Long HYPE ETF (TXXH), which provides leveraged exposure to the token.

Striking Gold. Just because Hyperliquid is seeing massive inflows, however, doesn’t mean bitcoin will lose its lustre. Bitcoin will always be digital gold for investors, but the network itself is incredibly cumbersome, he said.

“If you’re looking to build applications, I think Ethereum makes some sense,” he added. “However, in times like these, where capital is limited due to drawdowns, people are going to pick the fastest horses, and right now that’s the Hyperliquid story.”