IN THIS ISSUE

💵 USDh hits $5M TVL
📣 Hermetica’s statement on Bybit
🔶 Stacks in Q4 2024
💰 USDh yield recap
☎️ Hermetica Hangout: Zest & StackingDAO
📈 Weekly market review

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USDh hits $5M TVL

USDh has now surpassed $5 million in TVL! This is a step forward as we become the stablecoin of BTCFi.

Keep your eyes on Hermetica — we’re building momentum and bringing more liquidity into Bitcoin-backed DeFi. 

In the meantime, buy USDh and get in on the action!

Hermetica’s Statement on Bybit

All of USDh’s backing assets are held in the  institutional-grade off-exchange custody solutions from Copper and Ceffu. The backing assets are never held by a single entity or directly on any exchange. 

In response to the recent Bybit hack, Hermetica has proactively moved all hedging positions from Bybit to our other exchange partners.

USDh has currently no exposure to Bybit.

Learn more about our commitment to security-first infrastructure:

Stacks in Q4 2024

The Stacks Q4 2024 Brief is here from Messari Research. Let’s look at some of the highlights:

📈 Strong Network Growth: Stacks saw major increases in network revenue (+118%), daily active addresses (+62%), and miner participation (+35%)

⬆️ Major Upgrades: The Nakamoto Upgrade and sBTC launched

⚖️ Mixed Market Performance: Despite network growth, STX price (-17%) and market cap (-9.5%) declined, underperforming BTC and ETH. However, TVL (+16%) continued to increase

Find out more about Stacks’ performance in Q4 2024 in the full report!

USDh Yield Recap

Today’s APY Lesson:

🖋️ Your savings account offers 0.5% APY and a free pen
💰 USDh offers 15% APY backed by Bitcoin and no awkward bank visits

The choice is yours, pens or profits.

Hermetica Hangout: Zest & StackingDAO

This week, we hosted Noam and Leeor from Zest and StackingDAO on the Hermetica Hangout.

They shared their top strategies for effective USDh trades on Zest and insights on how you can leverage StackingDAO. If you missed the hang, be sure to catch the recording for valuable tips on maximizing your returns.

Don’t forget to follow our channel and turn on notifications for more updates!

Market Review

Bitcoin’s price has increased from $97,000 to $99,000 over the past three days on low volume. Market carry rates (funding rates, basis spread, options premium, etc.) remain low, indicating reduced demand for Bitcoin leverage compared to December and January. Bitcoin funding rates are near zero across all exchanges, and implied volatility (DVOL) is at its August 2024 lows of 47.29. The equal-weighted basis spread has remained below 10% for the third consecutive week after staying above 10% since the November election.

Aggregated altcoin market caps have been flat week-over-week at around $1.25T, briefly dropping to $1.2T on Tuesday following the "Libra" scandal on Solana. Bitcoin market cap dominance increased by 0.25% this week.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $96,786

• 30-Day MA: $99,151

• 180-Day MA: $83,280

• 360-Day MA: $73,986

• 200-Week MA: $44,284

Bitcoin's price is above all long-term moving averages (MAs) and the short-term 7-day MA but remains slightly below the 30-day MA. For Bitcoin to confirm an uptrend, it must move above both short-term MAs. This week's upward movement suggests some demand for long positions, with the key test being whether price can break above the 30-day MA on high volume in the coming days.

Key downside levels for Bitcoin to watch include $98,000, $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.

The Bitcoin returns are as follows:

• 1 month: -5.10%

• 3 months: 0.72%

• 6 months: 53.09%

• 12 months: 91.71%

Bitcoin's trailing 1-year return is currently 91.71%, well above the historical average of 56% since 2015. This represents a ~70% premium over the average annual return of the past decade. Trailing annual returns will remain elevated through March 15, 2025, but will begin to decline significantly next week as the post-BTC ETF rally from early 2024 is factored in. After March 15, trailing returns will rise again if the current price remains unchanged.

Historically, periods of above-average returns are often followed by below-average returns, and vice versa. Bitcoin saw a gradual downtrend from the launch of the BTC ETF in Q1 2024 until November 2024. While the current above-average return alone does not indicate a market top, it can provide additional context when combined with other metrics. The upcoming sharp drop in trailing annual returns will influence many trading models, and once annual returns fall below average, some mean reversion signals may turn bullish.

BTC ETF Flows

Net BTC ETF inflows since last Friday totaled -$419 million, with outflows occurring every day except Friday. Monday’s US federal holiday saw equity markets closed. This marks the second consecutive week of outflows, with nearly $900 million withdrawn from BTC ETFs over the past two weeks.

Volatility

Bitcoin's implied volatility (DVOL) is currently at 47.29%, placing it in the 2.7th 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 below the lower end of this range.

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

With DVOL now at historically low levels, BTC options present an attractive risk-return profile for those anticipating a reversion to the prior volatility range. Long strangles or straddles are currently more favorable than at any point in the past year.

Basis Spread

The basis spread, which measures the price premium of Bitcoin futures over spot, remains positive across all maturities. The average basis spread increased slightly from 8.22% APR last week to 8.86% APR this week but ended the third week of February 1.91% APR lower than its level at the start of the month.

The futures curve is in a normal contango from the March 28th contract onward and remains relatively flat across all maturities, except for the front-week contract (February 28th), which is significantly elevated. The nominal APR spread between the highest and lowest yielding maturities increased to 3.53% from 2.12% last week. However, excluding the volatile front-week contract, the spread narrows to 0.84%—a historically tight range between the highest and lowest futures maturities.

The current futures curve is neutral compared to recent weeks, displaying a normal contango where the front part of the curve is below later maturities, suggesting weak demand for spot buying. In contrast, the curve from a month ago was in a steep downward-sloping contango. The present curve is less bearish than last week due to the elevated front-week contract, indicating some demand for short-term leverage. However, the rest of the curve remains flat and slopes upwards like a typical contango.

A downward-sloping contango, on the other hand, indicates that demand for shorter maturities is outpacing supply from market makers. Market makers use front-month futures to hedge short or current-duration assets like perpetual contracts or spot, which allows them to borrow and sell more spot to maintain delta neutrality. As a result, the higher the basis spread for front maturities relative to distant maturities, the more bullish the market appears in the near term.

Macro

Equity market volatility has normalized since the December FOMC meeting, with a few mild shocks since, including those triggered by the Inauguration, Deepseek r1 release, and tariff scare. These small, periodic shocks are typical and not necessarily indicative of market distress. Bitcoin and equity volatility remain low.

Following December’s FOMC meeting, 30-year Treasury bond yields rose 16% from 4.31% to 4.97%, peaking on January 10th before falling to 4.69%. While rates remain elevated relative to December, the downward trend is supported by the dovish tone from the latest FOMC meeting. A recent CPI spike, driven by high egg prices due to avian flu, was not part of a broader inflation shift.

The VIX and MOVE indices have fallen to lows of 15.80 and 86.26, respectively.

Sincerely,
The Hermetica Team