IN THIS ISSUE

💸 Earn 5% USDh yield on Velar
📃 USDh leads stablecoin surge
💵 JPMorgan’s yield-bearing stable prediction
💰 USDh yield recap
☎️ Hermetica Hangout: Grantn.btc
📈 Weekly market review

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Earn 5% USDh Yield on Velar

For the first time in Bitcoin DeFi, you can go long on Bitcoin while earning a 5% yield on your USDh collateral.

When trading on Velar’s PerpDEX all USDh collateral automatically earns 5% APY, paid out weekly. That means you can now go long BTC while earning a passive income while doing it.

The first weekly payout is on Wednesday, April 16th. 

Start trading on the Velar PerpDEX now and earn a passive yield!

USDh Leads Stablecoin Surge

According to CryptoRank.io, Stacks recorded a 437% increase in stablecoin market cap in Q1 2025. One of the highest growth rates across all chains this quarter.

This surge was largely driven by USDh, which now accounts for 72.83% of the $6.17 million stablecoin volume on Stacks, based on data from DefiLlama.

JPMorgan’s Yield-Bearing Stable Prediction

JPMorgan analysts project that yield-bearing stablecoins could grow from 6% to 50% of the stablecoin market, fueled by rising demand for passive income in a high-rate environment.

Since November, the value of tokenized Treasurys and yield-bearing stablecoins has climbed from $4B to over $13B, with growing adoption in DeFi and as collateral across trading platforms.

As the trend accelerates, USDh is already ahead—delivering up to 25% APY in Bitcoin-backed yield, all without leaving the Bitcoin ecosystem.

USDh Yield Recap

While markets dipped, tariffs climbed, and your group chat panicked, USDh quietly printed 18% APY like nothing happened.

It’s the only asset that stayed unbothered, unfazed, and undeniably productive. If yields had a personality, USDh would be the calm uncle grilling in a storm, “we’ve seen worse.”

Hermetica Hangout: Grantn.btc

This week, we hosted Grantn.btc, Stacks App Launch Coordinator, for a deep dive into what goes on behind the scenes of launching apps on Stacks. He shared insights into the developer pipeline, opportunities around sBTC, and how new projects are getting to market. Listen to the recording here.

Next week, we’re switching things up with a community space co-hosted with Zest to break the ice on a big announcement. Set your reminder, you’ll want to be there.

Market Review

Bitcoin slipped from $83,000 last Friday to $81,000 this Friday, with notable intra-week volatility. Short-end market rates (funding, basis, and options premiums, etc.) eased slightly over the week. Net funding rates were negative, particularly on Sunday evening and Monday morning when Bitcoin briefly dipped below $80,000. The average (equal-weighted) basis spread declined 0.5 percentage points, from roughly 5% to 4.45%, driven by softening at the front end of the curve. Implied volatility (DVOL) hit a multi-month low of 45.42% on March 27 but has since climbed to 53%, peaking at 62.5% mid-week. As expected, a move below $80,000 triggered increased volatility as market makers adjusted their books. DVOL retreated again as Bitcoin recovered above $80,000 later in the week.

Altcoins also saw a pullback, with aggregated market cap falling from $972B to $931B. Bitcoin dominance rose 0.81% to 63.33%—its highest level since March 2021—and continues its upward trend since December 2022. The long Bitcoin / short altcoin trade remains one of the best-performing and lowest-volatility strategies of the past 2.5 years.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $80,103

• 30-Day MA: $83,345

• 180-Day MA: $89,863

• 360-Day MA: $76,361

• 200-Week MA: $45,673

Bitcoin remains 9.81% below its 180-day (6-month) moving average, having broken below this key long-term trendline over a month ago. While it trades 1.18% above the 7-day MA, it is still 2.76% below the 30-day MA, reflecting short-term weakness. However, Bitcoin continues to hold above both the 1-year (360-day) and 200-week moving averages—long-term bullish indicators. The prevailing trend remains downward until the price reclaims both short-term MAs and the 180-day MA from below.

Bitcoin downside levels: $78,500, $76,000, $67,000, $65,000

Bitcoin upside levels: $109,500, $105,000, $102,000, $99,500, $98,000, $96,000, $92,000, $88,000, $84,000, $82,500

Trend Following

Returns for 7-day and 30-day long Bitcoin trend-following portfolios are down 24.35% from local highs reached in late January—marking the steepest decline since April 2024, when losses topped 25%.

This extended two-month drawdown signals a broader deleveraging across crypto markets, particularly in directional long strategies. Much of the excess leverage in Bitcoin has already been flushed out. A bullish macro catalyst could quickly revive momentum, as sidelined traders begin to re-enter and re-leverage.

However, absent a positive shift in macro conditions, prolonged drawdowns could force larger funds to capitulate. FalconX, the largest OTC market maker, recently saw senior staff departures amid speculation of significant losses from long altcoin trend positions. Their unwind may have contributed to the recent altcoin selloff—and similar stress in large Bitcoin-focused funds could put additional pressure on prices.

Liquidations

Bitcoin long liquidations jumped to $738.26M this week from $318.59M last week. Over half occurred over the weekend during thin liquidity, as markets appeared to front-run expected turmoil on Monday.

BTC ETF Flows

Net outflows since Friday March 28th were $771.8 million.

$771.8 million net outflows have increased from net outflows of only $193.3 million last week.

Volatility

Bitcoin's implied volatility (DVOL) is currently at 53.38%. DVOL is currently in the 33.6th percentile relative to the average level seen in the last year. For most of the last 10 months DVOL has been between 50% and 70% and remains near the bottom of the range despite market turbulence. DVOL has had a strong mean reversion tendency when approaching the limit of the established 10-month range.

As anticipated, a Bitcoin price below $80,000 caused implied volatility to increase as market makers adjusted their books below that level. Volatility rises below $80,000 because the previous $74,000 all-time high (ATH) level is a volatility clustering area. Traders and market makers build ranges between prices and place stop losses at the range edges. $74,000 was the top of the previous range before November and after the breakout became the range low.

Basis Spread

The basis spread, or the price of a futures contract over its spot price, is positive across all maturities except the front week contract (April 18th). The average basis spread fell 0.54% week-over-week from 4.99% APR to 4.45% APR.

The futures curve is in a normal contango with front week contract (April 18th) the lowest APR at -0.25% and maturities rising thereafter. There is a 6.87% spread between the lowest and highest yielding maturity, up from 3.58% last week. The long and short ends of the curve are diverging from each other. The front month contract (April 25th) fell from 4.1% APR to 2.71% APR even as the 1-year contract (March 27th, 2025) rose from 6.14% to 6.62%. Market makers frequently utilize the front contracts to hedge spot exposure, whereas speculative traders predominantly engage with the long end of the curve. Despite current market challenges, long-term traders anticipate higher prices within the next year.

The current futures curve remains bearish in the near term. A gently upward-sloping contango where front-month futures trade above spot but below longer-dated contracts reflects weak demand for spot exposure.

In contrast, January’s curve (Figure 10) showed a steep downward-sloping contango, signaling strong near-term demand. This ideal structure occurs when demand for near maturities outpaces the supply market makers can source quickly.

Market makers hedge short-duration assets (e.g., front-week options, perps, spot) using front-month futures to maintain delta neutrality. A steeper premium on near maturities versus distant ones typically indicates bullish sentiment and tighter near-term supply.

Macro

Since taking office on January 20th, President Trump has ushered in a broad shift in U.S. geopolitical and economic policy. This new direction emphasizes bolstering domestic production through tariffs and reallocating military assets. Among these efforts, tariffs have become the most visible and contentious element.

The administration surprised markets by announcing tariff levels that exceeded most analysts’ expectations, resulting in one of the most severe weeks for Wall Street in recent memory.

Market stress intensified midweek when a large Treasury bond basis trade collapsed, causing financial instability. In response, Trump delayed the implementation of the new tariffs by 90 days for most countries—except China and Canada, which had already issued reciprocal tariffs.

On Thursday, Canada’s Prime Minister Mark Carney, former head of both the Bank of Canada and the Bank of England, offered to remove all retaliatory tariffs if the U.S. did the same. With Canada stepping back, only the U.S. and China currently maintain active tariffs. The U.S. tariff rate on Chinese goods now stands at 145%, while China has imposed tariffs of 84% on American products. In addition to tariffs, China has introduced non-tariff barriers, including bans on Hollywood films and rare earth element exports, further escalating trade tensions.

Meanwhile, the Federal Reserve held its second FOMC meeting of the year on March 19th. Chair Jerome Powell announced a significant reduction in the Fed’s balance sheet runoff, lowering monthly Treasury redemptions from $25 billion to $5 billion starting in April—a move interpreted as dovish. While there was market chatter about potential emergency quantitative easing (QE), the administration acted first, postponing tariff implementation.

Bond markets have reacted sharply. The collapse of the Treasury basis trade pushed 10- and 30-year yields to 4.52% and 5.03%, respectively—their highest levels since the Fed’s rate-hike peak in October 2023. However, following the 90-day tariff suspension, yields pulled back to 4.23% and 4.88%. From Wednesday to Friday last week, yields dropped further to 3.86% and 4.33%, respectively, as investors fled to safety.

By Monday, SOFR swap spreads began widening. A SOFR swap spread measures the difference between the fixed leg of a SOFR-based interest rate swap and the yield on a Treasury bond of the same maturity. A positive spread indicates the swap's fixed rate exceeds the Treasury yield; a negative spread suggests the opposite.

Many traders had entered into leveraged basis trades—shorting SOFR swap rates while buying Treasury bonds—to capture positive carry. For instance, on April 9th, a trader opening such a position could lock in a 0.4% annualized yield. Leveraged 20x, the return could exceed 8%, excluding gains from falling bond yields. However, these trades carry significant risk. As volatility surged, many funds were forced to unwind positions to meet collateral requirements elsewhere in their portfolios.

Large sell-offs in Treasuries triggered stop-losses, driving bond prices down and widening SOFR swap spreads. This cascade effect contributed to a broader rout in the Treasury market. The severity of the dislocation raised concerns about the solvency of highly leveraged hedge funds and their banking counterparties. In response, Treasury Secretary Bessent and President Trump chose to postpone and scale down the tariffs.

Despite heightened demand for liquidity, the U.S. dollar weakened. The Dollar Index (DXY), which measures the greenback against a basket of major currencies, has declined by more than 4.28% since the tariff announcement.

Volatility spiked across asset classes. The VIX, which gauges equity market volatility, surged to 41.51—its highest since August 2024. Treasury bond volatility, tracked by the MOVE Index, rose to 128.35, a level not seen since the end of the Fed’s tightening cycle in 2023.

Sincerely,
The Hermetica Team