IN THIS ISSUE

💵 USDh: The most traded token on Stacks
💰 USDh yield recap
☎️ Hermetica Hangout: Zest & StackingDAO
📈 Weekly market review

Like what you see? Join our exclusive, ever-growing community on Discord and take part in future product launches:

USDh: The Most Traded Token on Stacks

USDh was the most traded token on Stacks this past week. USDh led in weekly volume across all pools on Bitflow and Velar — outpacing everything else on Stacks.

The aeUSDC/USDh pool on Bitflow now holds the deepest liquidity on Stacks, with over $300K traded in the past 7 days and pool APYs hitting 74%.

On Velar, the USDh/aeUSDC pool grew over 56%, now holding $167K in TVL, with 24-hour volume up nearly 50%.

Liquidity is flowing. Yields are growing. USDh is winning. Your turn.

USDh Yield Recap

There was a time when yields of 14% APY were locked away for guys named Tom with trust funds and a decent golf swing.

Now they’re in the trenches. No suits, no gatekeeping, just yields for anyone paying attention.

If you haven’t staked yet, you're missing out on some serious rewards.

Hermetica Hangout: Zest & StackingDAO

This week, we hosted EasyA and learned how they make blockchain development accessible by partnering with top universities and communities.

Stay tuned for next week’s session for some alpha. We’re speaking with Noam and Leeor to learn the most effective USDh trades on Zest and StackingDAO.

Make sure you follow our channel and have notifications turned on!

Market Review

Bitcoin has had its first quiet week in over a month, holding steady at $97,000 since last Friday. Derivatives market carry rates—funding rates, basis spreads, and options premiums have all dropped significantly. Funding rates are near zero across all exchanges, implied volatility (DVOL) is at its lowest since November 10, 2024, and the equal-weighted basis spread has remained below 10% for a second consecutive week after staying above that level since the November election.

Altcoins have outperformed Bitcoin this week, with the aggregated altcoin market cap rising from $1.15T to $1.23T. This growth likely reflects releveraging after last Monday’s liquidation cascade wiped out excess leverage. Altcoins—particularly Ether—saw steeper liquidations and sharper declines than Bitcoin, making a stronger rebound expected. Still, Bitcoin’s market cap dominance remains 3.6% higher than pre-crash levels.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $96,784

• 30-Day MA: $100,570

• 180-Day MA: $81,908

• 360-Day MA: $73,122

• 200-Week MA: $44,073

Bitcoin's price remains above all long-term moving averages (MAs) and is slightly above the short-term 7-day MA but still below the 30-day MA. A true uptrend won’t be confirmed until Bitcoin reclaims both short-term MAs from below. Given last week’s market turmoil, an immediate uptrend would be optimistic. However, as traders gradually re-enter leveraged positions, Bitcoin could regain momentum.

Key downside levels for Bitcoin to watch include $96,000, $92,000, $89,000, $76,000, $74,000, $72,000. On the upside, levels are $109,500, $105,000, $102,000, $99,500, $98,000.

The Bitcoin returns are as follows:

• 1 month: -3.74%

• 3 months: 6.57%

• 6 months: 65.24%

• 12 months: 85.85%

Bitcoin's trailing 1-year return stands at 85.85%, well above its historical average of 56% since 2015—roughly 50% higher than the decade-long norm. Trailing annual returns are expected to remain elevated through March 15, 2025, before declining, assuming no significant price movement.

Historically, periods of above-average returns are often followed by below-average returns and vice versa. Bitcoin saw a steady downtrend from the launch of the BTC ETF in Q1 2024 until Donald Trump’s reelection on November 5, 2024. While the current elevated return doesn’t necessarily signal a market top, it is a useful indicator when combined with other metrics. Additionally, the sharp decline in trailing annual returns over the next month will influence many trading models. Once returns fall below average, certain mean reversion signals may trigger buy conditions for BTC.

BTC ETF Flows

Net BTC ETF inflows since last Friday totaled -$479.5 million, with outflows recorded on every trading day except Friday.

Volatility

Bitcoin's implied volatility (DVOL) currently stands at 51.68%, placing it in the 20.3rd percentile relative to its average over the past year. For most of the last eight months, DVOL has ranged between 50% and 70% and is now sitting at the lower end of that range.

DVOL briefly spiked when Bitcoin hit a new all-time high on Inauguration Day, again during the Nvidia market crash, and once more during last weekend’s tariff scare. However, each volatility spike was followed by a new low in implied volatility, reinforcing the current subdued market conditions.

Basis Spread

The basis spread, or the price of a futures contract over its spot price, is positive across all maturities. This week, the average basis spread increased slightly from 7.92% APR to 8.22% APR. However, it remains 2.55% APR lower than where it stood at the start of February.

The futures curve is in a normal contango from the front month contract (February 28th) onward. The futures curve is relatively flat across the whole curve with the front month and back month (March 28th) contracts slightly below all later maturities. There is a 2.12% spread between the lowest and highest yielding maturities, down from 5.65% last week.

The current futures curve is neutral/bearish relative to recent weeks. An upwards sloping normal contango, or where the front part of the curve is below later maturities, signals weak demand for spot buying. By contrast, the futures curve from a month ago (Figure 7) was in a steep downward sloping contango.

A downward sloping contango indicates that demand for closer maturities is outstripping the supply market makers can obtain in the short run. Market makers use front month futures to hedge short/current duration assets, such perp or spot, allowing them to borrow and sell more spot to balance the market while maintaining delta neutrality. Thus, the higher the basis spread for front maturities relative to distant maturities the more bullish the market is in the near term.

Macro

At its first FOMC meeting of the year on Wednesday, January 29, 2025, the Federal Reserve held interest rates steady, with Chairman Jerome Powell pausing cuts while signaling a dovish outlook for future reductions. President Donald Trump has repeatedly called for lower interest rates, including at the World Economic Forum, though the Fed remains independent in its decision-making.

Equity market implied volatility has normalized following three recent mild volatility shocks—on January 13 (Inauguration), January 25 (Deepseek r1 release), and February 3 (tariff announcements). These periodic fluctuations, occurring roughly every two weeks, are not necessarily signs of market distress. Both Bitcoin implied volatility (DVOL) and equity volatility remain low, and the December FOMC volatility spike was more than twice as severe as any of these recent shocks.

Following December’s FOMC meeting, 30-year Treasury yields surged 16%, rising from 4.31% to a peak of 4.97% on January 10. Since then, yields have declined to 4.73%, with the downtrend reinforced by the Fed’s dovish stance. A brief spike on February 12 was triggered by a hotter-than-expected CPI print, though the increase was largely driven by surging egg prices due to an avian flu outbreak rather than a broader inflationary shift.

The equity implied volatility index (VIX) and Treasury bond implied volatility index (MOVE) have both fallen to recent lows, now sitting at 15.07 and 84.57, respectively.

Sincerely,
The Hermetica Team