IN THIS ISSUE

💸 The Engine Behind USDh Yield
🌐 Stablecoins on Track for $1T
💰 USDh Yield Recap
☎️ Hermetica Hangout
📈 Weekly Market Review

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The Engine Behind USDh Yield

We published a new article breaking down exactly how funding rates translate into USDh yield.

Learn how our centralized exchange partners calculate funding rates for BTC perpetual futures and how these market dynamics create yield for USDh.

See the mechanics behind the numbers.

Stablecoins on Track for $1T

A Keyrock report projects stablecoins will capture 12% of global cross-border payment flows and reach $1 trillion in annual payment volume by 2030. 

DeFi is turning stablecoins into powerful “working capital engines,” with over $600M paid out through yield-bearing stables like USDh.

With a $271B market cap and growing regulatory clarity, stablecoins are moving into the core of global finance.

USDh Yield Recap

USDh is the only token that pays rent to your wallet.

Shows up every week with an envelope like, “Here’s for letting me stay.”

This week’s rent check was 15% APY.

Hermetica Hangout

This week, the focus was on taking the USDh story to new audiences. We joined the Stacks Town Hall to talk about USDh and give a small teaser for what’s coming next. Catch the recording here.

Next week, we’ll be hosting Arch Network for a session on how they’re building Layer 2 infrastructure to scale Bitcoin DeFi. Set a reminder.

Market Review

Bitcoin stagnated at $118,000 while Ethereum surged over 15% on the week. BTC failed twice to break above $120,000 on Monday and Thursday, each time followed by lower lows in BTC dominance. ETH’s outperformance is driving the dominance decline and is now closing in on its $4,860 ATH.

• DVOL bounced off lows but remains in a downtrend
• Average equal-weighted futures basis spread is up 1.86% APR to 10.07% APR
• Futures curve rose across maturities, flat beyond the front week contract
• Perps funding rates have been positive daily, peaking Sunday at 30.66% APR and Thursday at 29.57% APR

Aggregated altcoin market cap jumped from $1.50T to $1.61T week-over-week. BTC dominance fell 1.22% and is below the 1-year Moving Average.

The moving averages (MA) in Figure 1 are:

• Current Price: $118,800

• 7-Day MA:  $119,300

• 30-Day MA: $117,500

• 180-Day MA: $100,300 

• 360-Day MA: $91,300

• 200-Week MA: $51,400

Bitcoin is below the 7-day moving average, but above the 30-day MA after two rejections at $120K this week. The uptrend isn’t fully reestablished, and the rally may slow as attention shifts to altcoins.

Trend Following

Returns for a Bitcoin 7-day and 30-day long trend following portfolio are down 4.58% from January’s ATH. Three months ago, the drawdown was 22.99%, the largest since late 2024. Portfolios were flat from January’s ATH on Thursday morning, but the ATH rejection later that day drove a 4% loss.

BTC ETF Flows

Net inflows this week totaled $442M, up $1.4B from last week’s $963M outflows. Ethereum ETF inflows hit a record $2.85B.

Volatility

Bitcoin’s implied volatility (DVOL) rebounded from 34.35% to 36.41% but remains at lows not seen since September 2023. Low implied volatility reflects market makers already being hedged.

A growing trend in TradFi Bitcoin products, selling calls for yield, is pressuring options prices and capping implied volatility. Yield Max ETF ($MSTY) sells $4.5B in notional calls on Strategy (formerly MicroStrategy) stock each month/quarter, with hedge funds running similar trades on BTC-linked stocks and ETFs.

Basis Spread

The basis spread remains positive across all maturities. The average equal-weighted basis rose 1.86% APR from 8.21% to 10.07% APR.

The futures curve is in a flat inverted contango, with front weeks trading above later maturities. The spread between the lowest and highest yielding maturity is 3.42%, or 1.3% when excluding the front week from the average.

TradFi call selling indirectly suppresses Deribit’s BTC futures curve by reducing market maker demand for delta hedges. Futures volume is down 50% from December despite higher spot prices.

Macro

The Fed held rates and central bank liquidity steady, while President Trump plans to meet Russian President Putin today to negotiate a Ukraine–Russia ceasefire. 

The July 30th FOMC meeting brought no rate cuts or QT changes from the $5B level set in March. The European Central Bank (ECB) cut rates 25 bps on June 6th but has held steady since. The Swiss National Bank cut to 0% in June. The Bank of England (BOE) cut 25 bps recently, while the People’s Bank of China (PBOC) has not moved.

The Dollar Index ($DXY) is flat at 98.06, near 3-year lows. 30-year Treasury yields are 4.86%, just off May’s 5.15% cycle high. Earlier this year, rising long-term yields and a weak $DXY pointed to foreign diversification away from US markets, but recent trade deals are reversing the trend.

Historically, $DXY and US treasury bond yields have a strongly positive correlation. Figure 8 demonstrates the strong correlation between the relative value of the dollar (DXY) and U.S. Treasury bond yields. 

$DXY and long-term yields began to decouple after President Trump’s tariff announcements, but are reversing as trade deals get signed.

Both equity market implied volatility (VIX) and Treasury bond implied volatility (MOVE) remain near long-term steady states. The Middle East conflict had only a mild impact on equity IV, and once it ended, the VIX dropped to fresh lows. VIX sits at 14.82, down from 15.41, while MOVE is at 76.77, down from 80.15.

Sincerely,
The Hermetica Team