How to Trade Themes US Defense ETF (DEFENSE) on Hyperliquid

What Is DEFENSE

DEFENSE is a perpetual futures contract deployed on Hyperliquid via the Ventuals protocol, tracking the Global X Defense Tech ETF (SHLD). SHLD launched in September 2023 and has since grown to roughly $8.67 billion in assets under management, making it one of the largest pure-play defense technology funds in existence.

The underlying index holds around 52 positions spanning defense contractors, cybersecurity firms, and advanced hardware makers. The top ten holdings account for about 60% of the fund and read like a who's-who of Western and allied defense: Lockheed Martin (8.9%), RTX Corporation (7.7%), General Dynamics (7.0%), Rheinmetall (6.3%), and Palantir Technologies (6.2%). Further down the roster sit BAE Systems, L3Harris, Northrop Grumman, Hanwha Aerospace, and Leonardo — a genuinely global basket that captures not just American primes but European and South Korean defense expansion.

Sector-wise the fund is roughly 89% industrials and 11% technology, though that technology slice — dominated by Palantir and Leidos — is where a lot of the AI-defense crossover lives. The expense ratio is 0.50%.

Why DEFENSE Matters Right Now

The macro tailwind behind this ETF is hard to overstate. Global defense spending is projected to top $2.6 trillion in 2026, continuing a run of 7%+ real annual growth. NATO allies committed at The Hague summit to raise defense expenditure targets to 5% of GDP by 2035, a structural shift from the old 2% benchmark that had already proven insufficient.

The results show up in performance. SHLD returned 74.55% in 2025 on a NAV basis and has added roughly 17% year-to-date through mid-March 2026. That's not just a geopolitical fear trade — it reflects genuine procurement acceleration. Rheinmetall is scaling ammunition production across Europe. Hanwha Aerospace is exporting K9 howitzers and Redback IFVs to Poland and Australia. Palantir's defense AI contracts keep expanding. These are multi-year order books, not one-quarter blips.

The US-Iran escalation in early 2026 added another catalyst, driving significant inflows into defense ETFs as traders repositioned for prolonged Middle East instability. But the structural case doesn't depend on any single conflict — the rearmament cycle across NATO, the Pacific rim, and the Middle East is broadly self-reinforcing.

The HIP-3 Perpetual Contract

On Hyperliquid, DEFENSE trades as a HIP-3 perpetual futures contract deployed by Ventuals. HIP-3 perps are oracle-fed contracts that settle on Hyperliquid's decentralized matching engine, meaning all trades execute on-chain with the same order book infrastructure used for native crypto perps.

The contract tracks SHLD's reference price and uses a funding rate mechanism to keep the perp price tethered to the underlying. When the perp trades above the reference price, longs pay shorts; when below, shorts pay longs. This creates a natural arbitrage incentive that keeps spreads tight relative to the spot ETF.

Traders can go long or short with up to 20x leverage, which means a 1% move in SHLD translates to a 20% P&L swing at max leverage. Current 24-hour volume sits around $380,000 — this is a newer listing, so liquidity is still building. Position sizing matters more here than on a deep BTC or ETH book.

The practical advantage is access: DEFENSE lets you trade a diversified defense basket 24/7, with no brokerage required, no market-hours restriction, and the ability to short freely. For crypto-native traders who want defense exposure without leaving the Hyperliquid ecosystem, this is the cleanest path available.

Key Trading Considerations

Concentration risk. Despite holding ~52 names, the top five positions account for roughly 36% of the fund. Lockheed Martin alone is nearly 9%. A single earnings miss or contract cancellation from a top holding can move the entire basket.

Geopolitical sensitivity. This is a feature and a risk. Defense stocks react sharply to escalation headlines, ceasefire talks, and budget negotiations. If you're trading DEFENSE on leverage, a weekend peace deal or a sudden diplomatic thaw can gap the reference price against you before Monday's equity open — but the perp trades continuously, so you'll see the move in real time.

Funding rate drag. In a sustained bull trend for defense stocks, the perp will typically trade at a premium, meaning longs pay funding. Over weeks and months, this cost compounds. If you're holding a leveraged long for a macro thesis rather than a short-term trade, factor funding into your expected returns.

Liquidity. At ~$380K in daily volume, large orders will have market impact. Use limit orders, scale into positions gradually, and be aware that during low-activity hours the spread may widen. As the listing matures and more market makers participate, this should improve.

Valuation. SHLD trades at a P/E ratio of roughly 38, which prices in significant earnings growth. The defense spending tailwind is real, but it's not a secret — a lot of the procurement cycle is already reflected in current multiples. Shorting DEFENSE during periods of overextension is a legitimate strategy, not just a contrarian take.

Trading on Hyperliquid

Trade DEFENSE on Hyperliquid with up to 20x leverage.