Bitwise Crypto ETF Rebalances: Removes DOT and AVAX, Adds HYPE and XLM — What Are Institutional Funds Betting On?

On July 9, 2026, Bitwise 10 Crypto Index ETF (BITW), one of the world’s largest cryptocurrency index funds, completed its latest round of monthly rebalancing. The outcome was unexpected yet reasonable: Polkadot (DOT) and Avalanche (AVAX) were removed from the portfolio, while Hyperliquid (HYPE) and Stellar (XLM) became new additions.

BITW’s operating mechanism is similar to index funds in traditional stock markets—holding the top ten eligible cryptocurrencies automatically by market capitalization and rebalancing on a regular monthly schedule. Therefore, each component adjustment is not just a change in the list of assets, but also an institutional-level reshuffling that reflects market-cap flows, shifts in asset attention, and trends in ecosystem development.

As of July 10, 2026, in the adjusted BITW holdings, Bitcoin (BTC) still dominates the portfolio with a 77.54% weighting, Ethereum (ETH) accounts for 13.04%, XRP accounts for 4.21%, and Solana (SOL) accounts for 2.78%. HYPE, with a 0.93% weighting, becomes the fund’s fifth-largest holding, followed by XLM at 0.38%.

Behind this reallocation is a deeper change in how institutional investors assess the value of crypto assets—from the narrative competition of Layer 1 public chains to the application value of on-chain financial infrastructure.

Why Did Bitwise Adjust BITW’s Components?

BITW tracks the Bitwise 10 Large Cap Crypto Index, which is a rules-driven index rather than a subjective stock-picking process. Its core screening criteria include market-cap ranking, liquidity, and asset investability. During monthly rebalancing, the index automatically removes assets that no longer meet the thresholds and adds newly qualifying products.

This means that changes in components are essentially the output of a set of quantitative rules, not a subjective decision by Bitwise’s investment committee. But precisely because the rules are transparent and predictable, each rebalancing more accurately reflects changes in market structure—what assets are growing and what assets are shrinking are directly reflected in the index composition through market-cap ranking.

HYPE currently ranks 10th among all cryptocurrencies by market cap, at approximately $15.144 billion. DOT’s market-cap ranking has fallen to 68th place (about $1.442 billion), while AVAX ranks 40th (about $2.937 billion). Under BITW’s rule of holding only the top ten large-cap assets, DOT and AVAX exiting the index are an inevitable result of changes in market-cap ranking.

But market-cap ranking is only the surface. Market cap itself is a discount of the market’s expectations for an asset’s future value. HYPE’s market cap surpassing DOT and AVAX reflects a fundamental shift in how the market is pricing the relative value between the on-chain trading track and the Layer 1 public-chain track.

Why Was HYPE Able to Enter Institutional View?

HYPE’s selection is the biggest highlight of this rebalancing, as well as a signature event showing institutional investment logic shifting from an “infrastructure narrative” to an “application value narrative.”

Hyperliquid is a decentralized perpetual contract trading platform that uses an on-chain order-book model, emphasizing a high-performance trading experience. In the first half of 2026, the platform processed $1.34 trillion in trading volume and generated $320 million in protocol revenue. From the beginning of the year to date, the HYPE token is up 165%, reaching a historical high of $76.70 on June 16.

These data point to a core fact: the crypto market is moving from “infrastructure competition” to “application value competition.”

In recent years, the mainstream narrative has been the competition among Layer 1 public chains—Ethereum, Solana, Avalanche, and Polkadot each telling different technical architecture stories, with capital betting on “which chain will become the next mainstream infrastructure.” But Hyperliquid’s rise provides another path: you don’t necessarily need to become a universal Layer 1. By focusing on a specific vertical—such as on-chain derivatives trading—and building product-market fit, you can still create substantial protocol value.

Institutional recognition of HYPE is also increasing. On May 15, 2026, Bitwise launched a dedicated spot Hyperliquid ETF (BHYP) with a management fee of 0.34%, and it includes a staking option. Cumulative net inflows into ETF products related to HYPE have already exceeded $100 million. This indicates that institutional attention to on-chain trading infrastructure is moving from the periphery into the mainstream.

However, HYPE’s token supply structure is worth paying close attention to. Its total supply is 1 billion tokens, and currently only about 22% is circulating. The fully diluted valuation is close to $64 billion. Future token unlocks may affect the price—an anti-dilution risk that Bitcoin and Ethereum held within BITW do not have.

Why Were DOT and AVAX Removed?

DOT and AVAX were removed from BITW not because the projects themselves “failed,” but because changes in market preference are reflected in market-cap ranking.

Polkadot once led the narrative with cross-chain interoperability and a multi-chain ecosystem architecture, reaching an all-time high of $54.98 in November 2021. But the market’s current focus has shifted from “how chains connect” to “what applications are running on-chain, how many users are using them, and how much capital is flowing.” DOT is currently trading at about $0.8522, down roughly 98% from its all-time high, and its market-cap ranking has slipped to 68th place.

Avalanche gained favor with its subnet architecture and positioning as an enterprise blockchain, breaking above $144 in November 2021. But competition in the Layer 1 space has intensified, and new ecosystem capital has clearly been diverted. AVAX is currently trading at about $6.803, down roughly 95% from its all-time high, and it ranks 40th by market cap.

It’s important to emphasize that neither technical development, the staking ecosystem, nor on-chain activity on the two networks has stopped. They were included when BITW listed on the NYSE Arca in December 2025, and the holdings were maintained for about six months. Being removed from the index reflects the fact that incremental market capital is more inclined to allocate to assets growing faster, rather than being a denial of the projects’ technical capabilities.

What Does XLM’s Inclusion Mean?

Stellar (XLM)’s inclusion is also worth noting. XLM currently has a market cap of about $6.49 billion, ranking 24th among all crypto assets. Although it is not in the top ten by market cap, it was included in the eligible asset group during Bitwise’s qualification screening.

Stellar has long been positioned for cross-border payments and financial infrastructure, focusing on stablecoin transfers and real-world payment scenarios. Against the current backdrop in which RWA (real-world assets), stablecoins, and global payments have once again become hot topics, XLM’s inclusion reflects that institutions are refocusing on blockchain networks with real-world financial connectivity.

XLM’s price today is $0.19009, up 4.56% over the past 24 hours and up 3.80% over the past 30 days. Although it is down 37.30% over the past year, its historical accumulation in the payments space and its partner network still give it unique institutional appeal.

What New Trends Are Institutional Crypto Investments Focusing On?

This BITW rebalancing releases at least three layers of market signals:

First, a shift from public-chain narratives to application narratives. In the past, the primary logic behind institutional allocations to crypto assets was “which Layer 1 will become the infrastructure of the next-generation internet.” Now, institutions are starting to focus on the specific financial application layer—on-chain trading platforms (Hyperliquid), payment networks (Stellar), and other application protocols that can directly generate revenue, attract users, and accumulate trading volume.

Second, a shift from technical competition to user demand. The market’s evaluation of projects is moving from “how advanced the technology is” to “how many people are using it, how much trading volume it generates, and how much revenue it creates.” HYPE’s $1.34 trillion trading volume and $320 million in revenue are more convincing entry tickets for institutions than any technical whitepaper.

Third, RWA and on-chain finance are becoming long-term directions. Stablecoins, RWA, DeFi infrastructure, and on-chain trading are becoming core tracks for long-term institutional allocations. XLM’s inclusion and HYPE’s rise together point to a trend: crypto projects that can connect traditional finance with real-economy demands are gaining increasing institutional recognition.

Conclusion

Bitwise BITW’s monthly rebalancing is, in essence, a periodic snapshot of changes in market structure. The removal of DOT and AVAX does not mean their technology has lost value; the inclusion of HYPE and XLM does not mean they are without risk.

What is truly worth watching is the direction of the trend: institutional capital is moving from broad narrative competition among Layer 1 public chains to value validation of on-chain financial applications. Hyperliquid’s $1.34 trillion trading volume and 165% year-over-year growth, as well as Stellar’s long-term layout in cross-border payments, collectively point to an increasingly clear direction—the next phase of the crypto market belongs to the financial application layer that can generate real revenue and serve real needs.

For investors tracking shifts in institutional allocations, BITW’s rebalancing provides a rare window to observe this: when an index fund speaks through market-cap rankings, it is essentially telling us in the most straightforward way possible—where the money is flowing.

FAQ

Q1: How often does Bitwise BITW rebalance?

BITW uses a monthly rebalancing mechanism. Each month it automatically adjusts holdings based on criteria such as market-cap ranking, liquidity, and asset investability. The adjustment on July 9, 2026 was a routine operation under this mechanism.

Q2: What is HYPE’s weight in BITW?

According to Bitwise’s published rebalancing results, HYPE is included in BITW with a 0.93% weighting, and XLM’s weighting is 0.38%. HYPE becomes the fund’s fifth-largest holding, ahead of Cardano, Chainlink, Litecoin, and Sui.

Q3: Will DOT and AVAX have another chance to return to BITW in the future?

Possibly. BITW’s index mechanism is rule-driven—if DOT and AVAX’s market-cap rankings rise back into the top ten, they may be re-included. But this would require the projects to regain market recognition in areas such as user growth, application activity, and capital inflows.

Q4: What are the main risks of Hyperliquid?

The main risk comes from the token supply structure. HYPE has a total supply of 1 billion tokens, and currently only about 22% is circulating; the remaining approximately 780 million tokens will be unlocked gradually in the future. Subsequent unlocks may create price pressure—an anti-dilution risk that Bitcoin and Ethereum held within BITW do not have.

Q5: Which crypto tracks is institutional capital focusing on right now?

Currently, institutional capital is shifting from the broad narrative competition among Layer 1 public chains to value validation of on-chain financial applications. It is focusing on application-layer protocols that can generate real revenue, including on-chain trading platforms (such as Hyperliquid), cross-border payment networks (such as Stellar), RWA, and stablecoin infrastructure.