IN THIS ISSUE

💸 Hermetica 2.0 now live
🏦 U.S. banks support stables
💰 USDh yield recap
☎️ Hermetica Hangout: Hermetica 2.0
📈 Weekly market review

Like what you see? Follow us on X so you don’t miss any future announcements:

Hermetica 2.0 Now Live

We are excited to announce the launch of Hermetica 2.0.

Hermetica 2.0 reflects the product we set out to build: A stablecoin backed by Bitcoin, yielding from market activity, fully transparent and auditable by anyone.

Hermetica 2.0 offers:

It is the first real banking experience built on Bitcoin.

U.S. Banks Support Stables

The U.S. Office of the Comptroller of the Currency (OCC) has confirmed that banks are legally permitted to engage in key crypto-related activities.

U.S. banks can now hold stablecoin reserves, provide crypto custody services, and use stablecoins for payments.

It’s becoming increasingly clear that stablecoins play a vital role  in the future of modern finance.

USDh Yield Recap

This week, APYs came in at 5%. With our new UI, you can watch your yield grow in real-time (and even share it on X with 1 click).

When your dollars earn like this, it's only right to post it like a proud parent on graduation day.

Hermetica Hangout: Hermetica 2.0

This week, we hosted a special community call to celebrate the launch of Hermetica 2.0. We walked through the new UI and discussed how it shapes Bitcoin DeFi. Listen to the recording here.

Next week, we’re keeping the momentum going with Liquidium. Set a reminder, you’ll want to catch this one.

Market Review

Bitcoin broke its 4-month downtrend this week, reaching $93,500. Market rates (funding rates, basis spread, options premium, etc.) moved higher, especially on the long end of the curve. Funding rates were notably volatile, swinging from strongly positive through Tuesday to negative by Friday morning. The equal-weighted basis spread rose 0.13% to 5.69%, driven by long-dated contracts. Implied volatility (DVOL) is now at 46.82%, nearing a multi-month low.

Altcoins rebounded, with total market cap climbing from $950.4B to $1.03T. However, Bitcoin dominance still rose 0.84% to 64.38%, its highest level since March 2021. Dominance has been trending up steadily since December 2022. The long BTC/short altcoin trade continues to be one of the most consistent and low-volatility performers over the past 2.5 years.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $90,332

• 30-Day MA: $84,672

• 180-Day MA: $91,418

• 360-Day MA: $77,278

• 200-Week MA: $46,189

For the first time since early March, Bitcoin has broken above its 180-day moving average, signaling a potential new uptrend. Bitcoin is 3.44% above the 7-day MA, 10.35% above the 30-day MA, and 2.21% above the 180-day MA. Sustained price action above the 180-day average in the coming weeks would confirm a new uptrend.

Bitcoin downside levels: $92,000, $88,000, $84,000, $82,500, $78,500, $76,000, $67,000, $65,000

Bitcoin upside levels: $109,500, $105,000, $102,000, $99,500, $98,000, $96,000

Trend Following

Bitcoin 7-day and 30-day long trend-following portfolios are down 15.49% from local highs set in late January, though returns reversed direction this week. Last week’s 22.99% drawdown marked the steepest decline in long-oriented trend strategies since late 2024, when portfolios fell nearly 25%.

The recent drawdown reflected broad deleveraging as traders exited carry trades. However, bullish macro catalysts this week have sparked a rebound. Traders are now re-leveraging and rotating into the Bitcoin carry trades they had unwound over the past two months.

Liquidations

Bitcoin long liquidations fell to $126.92M this week, down from an adjusted $168.45M last week. Liquidations below $250M are typical during relatively uneventful weeks.

BTC ETF Flows

Net inflows totaled $2.65B this week; the strongest weekly flows since November 1st. With U.S. markets closed for Good Friday last week, flows surged from Monday onward following a muted $12.7M in net inflows the week prior.

Volatility

Bitcoin’s implied volatility (DVOL) is at 46.82%, placing it in the bottom 2.5% of its range over the past year. For most of the last 10 months, DVOL has hovered between 50% and 70%, and it’s once again trading below the lower bound as bullish macro catalysts get priced in. Historically, DVOL exhibits strong mean-reverting behavior near the extremes of this range, suggesting it may be approaching a local bottom.

Basis Spread

The basis spread remains positive across all maturities, with the average (equal-weighted) spread rising 0.13% this week, from 5.56% to 5.69% APR, and up 1.25% over the past two weeks. The futures curve is in normal contango: the front-week contract (May 2nd) yields the lowest APR at 3.87%, with rates increasing across longer maturities. The spread between the lowest- and highest-yielding contracts widened to 3%, up from 2.4% last week.

APR declined slightly at the front end, with the front-month (May 30th) contract falling from 4.66% to 4.53%. Meanwhile, long-dated contracts moved higher as December 2025 rose from 6.42% to 6.77%, and March 2026 increased from 6.68% to 6.87%.

Market makers frequently utilize the front contracts to hedge spot exposure, whereas speculative traders predominantly engage with the long end of the curve. The rise at the long end of the curve signals that long-term traders are taking positions while spot demand has declined slightly from last week.

The current futures curve is neutral in the near term. An upwards sloping normal contango, where the front part of the curve is above spot but below more distant maturities, signals weak demand for spot buying relative to what is expected during bull markets.

The ideal futures curve is a downward sloping contango where demand for closer maturities outstrips the supply market makers can obtain in the short run. The futures curve from January (Figure 9) exemplifies the market under high spot demand.

Market makers use front month futures to hedge short/current duration assets such as front week options, perps, and spot. Using front maturities allows market makers to manage larger books while maintaining delta neutrality. The higher front maturity APRs are over distant maturities, the more bullish the market is in the near term.

Macro

Since taking office on January 20th, President Trump has enacted a broad shift in U.S. geopolitical and economic policy, focusing on domestic industrial support and reallocation of military assets. Tariffs have been the most prominent component of this new agenda.

Tariffs on Chinese goods initially peaked at 145%, with retaliatory tariffs from China reaching 125%. In addition to tariffs, China has introduced non-tariff measures, including restrictions on Hollywood films and rare earth exports, in an effort to counterbalance U.S. policy. Although Trump has made several concessions like excluding smartphones and semiconductors from some tariffs under lobbying pressure, tariffs on Chinese goods remain high.

Both nations are in negotiations to build trade coalitions. Last week, President Xi of China visited Vietnam as part of a broader Southeast Asia tour aimed at strengthening regional economic ties. In parallel, the U.S. has signaled it may ease tariffs for countries that impose trade barriers against China.

On March 19th, the Federal Reserve held its second FOMC meeting of the year. While the Fed kept rates steady, Chair Powell announced a significant reduction in the pace of quantitative tightening, lowering monthly Treasury redemptions from $25 billion to $5 billion starting in April. Markets interpreted the move as a dovish pivot, especially in the context of recent volatility.

Meanwhile, the European Central Bank cut interest rates by 25 basis points last Thursday, citing concerns over American tariffs and their deflationary impact on European exports.

Markets have repriced expectations for U.S. rate cuts. December SOFR futures now imply 75 basis points of cuts by year-end, up from 50 basis points prior.

The Treasury market experienced sharp moves. Yields on 10- and 30-year bonds surged to 4.52% and 5.03%, respectively. However, after the 90-day tariff suspension was announced, bond prices rose and yields declined: the 10-year yield fell to 4.31% and the 30-year to 4.76%. Immediately after the initial tariff announcement, yields had dropped further, from 4.13% to 3.86% (10Y) and from 4.49% to 4.33% (30Y), as investors moved into Treasuries amid market uncertainty. Yields began to climb again after April 7th, when SOFR swap spreads widened and further disrupted the basis trade.

In currency markets, the U.S. Dollar Index ($DXY) fell sharply, declining more than 5.5% to a low of 97.92 on Monday. The DXY has since recovered modestly and established support around 100.

Volatility across traditional financial markets also increased. The equity market implied volatility (VIX) and the MOVE index, which tracks implied volatility in Treasury markets, surged after the tariff announcements and remain elevated. As of this week, the VIX sits at 26.46 (down from a peak of 29.66) and the MOVE index is at 108.28 (down from 119.4), marking the highest levels since August 2024 and the end of the Fed's hiking cycle in late 2023, respectively.

Sincerely,
The Hermetica Team