IN THIS ISSUE

💸 Mint USDh with USDC on Ethereum
🗞️ Jakob on Inflection podcast
💰 USDh yield recap
☎️ Hermetica Hangout: FarmerJoe
📈 Weekly market review

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Mint USDh with USDC on Ethereum

We're introducing a new way to access USDh.

Verified users can now mint fresh USDh 1:1 with USDC on Ethereum, directly in our app.

No bridges, no slippage, and no need to manage multiple apps. Just connect your Ethereum wallet, deposit USDC, and receive newly minted USDh to your Stacks address.

Access Bitcoin-backed yield. Apply to become a minter:

Jakob on Inflection Podcast

Jakob, our founder and CEO, joined the Inflection podcast to share the story behind USDh and the journey of building Hermetica from the ground up.

Jakob covers everything from early inspiration to the technical and operational challenges of designing a Bitcoin-backed, yield-bearing stablecoin.

If you’re curious about where BTCfi is headed, or how Hermetica is navigating it, this one’s worth a listen.

USDh Yield Recap

We heard our yields have been putting a smile on your face. This week, we came with 10% APY, so you can keep grinning.

If your stablecoin isn’t making you smile, swap it for one that will. 

Hermetica Hangout

This week, we hosted FarmerJoe for a deep dive into stablecoins, BTCfi, and the path to broader adoption. Catch the full recording here.

Next week, we’ll be joined by Bitflow, one of the leading DEXs on Stacks, for an inside look at what it takes to build an efficient trading infrastructure on Bitcoin.

Set your reminder, you don’t want to miss this one.

Market Review

Bitcoin pierced the $112,000 all-time high (ATH) this week, signaling the potential start of a new bull market.

• DVOL remains near a two-year low.

• The average equal-weighted futures basis spread rose by 1.75% to 6.77% APR, but remains below the 9.15% peak set on May 9.

• The futures curve is in a flat contango structure.

• Perpetual futures (perps) funding rates stayed positive throughout the week, peaking at 24.09% APR on Thursday.

• Aggregated altcoin market caps surged from $1.15 trillion to $1.27 trillion. Bitcoin dominance declined by 0.62% but remains near multi-year highs.

The moving averages (MA) in Figure 1 are:

• Current Price: $116,600

• 7-Day MA: $111,200

• 30-Day MA: $107,200

• 180-Day MA: $96,900

• 360-Day MA: $85,900

• 200-Week MA: $49,700

Bitcoin breaking through ATHs implicitly means it has surpassed all short-term moving averages (MAs). Bitcoin is in an uptrend and has strong momentum since it broke the previous ATH barrier on high volume.

Trend Following

Returns for a Bitcoin 7-day and 30-day long trend following portfolio are now down just 3.18% from January’s ATH. Two months ago, the portfolio was down 22.99%, marking the largest drawdown in long-oriented trend strategies since late 2024.

BTC ETF Flows

Net outflows this week were $1.69 billion. Net inflows into Bitcoin ETFs exceeded $1B per week over the last 5 weeks, indicating a strong demand for Bitcoin allocations in TradFi.

Volatility

Bitcoin’s implied volatility (DVOL) currently sits at 38.46% after reaching a low of 36% earlier this month, the lowest since October 2023. Despite Bitcoin’s breakout to new all-time highs, the options market has remained quiet. If prices continue rising, DVOL may increase as market makers respond by reducing offers.

Basis Spread

The basis spread, the difference between futures prices and spot prices, is positive across all maturities. This week, the average (equally weighted) basis spread rose by 1.75% APR, from 5.02% APR to 6.77% APR. Despite this increase, it remains 2.38% APR (or 26%) below its recent peak on May 23rd.

The futures curve remains in a normal contango, with the front-month contract (July 25th) yielding the lowest APR at 6.31%, and maturities rising steadily to the June 2026 contract at 6.99%. The spread between the lowest and highest yielding contracts is 1.2%, or 0.77% when excluding the more volatile front week (July 18th) maturity.

Market makers frequently utilize the front contracts to hedge spot exposure, whereas speculative traders predominantly engage with the long end of the curve. The fall in the front-end is a response to declining spot and short-duration options demand. The futures curve from January (Figure 8) exemplifies a market under high spot demand.

Macro

Market euphoria returned this week despite little change in the macro environment. Last week, U.S. President Trump signed the “Big Beautiful Bill” into law, which has positive implications for corporate taxes. The changes to tax structure will likely increase profitability and put more money into the financial system through share buybacks and dividends. The often-cited Bitcoin–M2 money supply correlation (Figure 9) may explain the long-term uptrend in Bitcoin since 2023, but it’s not a precise guide for when uptrends begin or end.

M2 money supply includes the total amount of money held as physical currency, checking deposits, savings deposits, time deposits, and money market funds. M2 changes with the amount of leverage in the financial system, either created by private lenders (banks) through commercial lending or by the Federal Reserve through quantitative easing. Since 2022, the Fed has been running a policy of quantitative tightening and is actively reducing the M2 money supply. Therefore, the increase in M2 likely stems from higher private sector leverage. Increased private sector leverage can heighten the risk of deflationary shocks when borrowers are unable to service their debts.

On June 18th, the Federal Reserve held its fourth FOMC meeting of the year. Powell did not cut rates or announce any reduction in quantitative tightening (QT) from the $5 billion monthly runoff level set in March. The European Central Bank (ECB) cut rates by another 25 basis points on June 6th, its second consecutive monthly cut. The Swiss National Bank also lowered rates by 25 basis points to 0% this month, while the Bank of England (BOE) and the People’s Bank of China (PBOC) held steady.

The Dollar Index ($DXY), which tracks the US dollar against a basket of other currencies, rose to 97.78 as of Thursday evening, recovering 1.45% from its three-year low earlier in the month.

30-year US Treasury yields reached 5.15% on May 22nd, a level not seen since the end of the Fed’s rate hiking cycle in 2023. As of this Thursday, yields have retreated to 4.88% but remain elevated.

Historically, DXY and long-term US Treasury yields show a strong positive correlation. Figure 10 illustrates this relationship between the dollar’s value and bond yields over time.

Equity market implied volatility (VIX) and U.S. Treasury bond implied volatility (MOVE) remain near long-term averages. The Middle East conflict had only a mild impact on equity volatility, and as conflicts cooled, the VIX dropped to new lows. The VIX is currently 15.77, unchanged from 16.37 the previous Thursday, while the MOVE index stands at 81.58, down from 86.09.

Sincerely,
The Hermetica Team