IN THIS ISSUE

🔮 Stablecoin signal
💵 Maximize USDh
💰 Regulatory clarity
💸 USDh yield recap
☎️ Hermetica Hangout: Signal21
📈 Weekly market review

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What Stablecoin Increase Means for Crypto

Has the market peaked? IntoTheBlock says not yet.

According to crypto research firm IntoTheBlock, historical data suggests that stablecoin supply peaks often coincide with market cycle highs—yet stablecoin supply is still climbing.

Despite recent market downturns, stablecoin supply has increased over 50% in the past year, growing from $138.2B in March 2024 to $225B today, per data from Artemis.

What does this signal for the broader market? Join the discussion with IntoTheBlock on X.

How to Maximize USDh

We’ve put together a complete guide on how to make the most of USDh, whether you’re providing liquidity, supplying on Zest, borrowing for yield loops, or simply staking for yields.

Learn how to earn up to 25% APY, accumulate Hermetica Points, and take advantage of DeFi opportunities.

Check out the full guide on how to optimize your yields and start earning today. 

Stablecoin Regulations Ease in Japan & Korea

Japan and Korea’s governments have approved a plan to ease regulations for stablecoins and crypto brokerages, making it easier for companies to operate in both  countries. This move signals a growing acceptance of digital assets and a step toward integrating crypto more seamlessly into Japan’s financial system.

As regulatory clarity improves, stablecoins like USDh are well-positioned to thrive in global markets built on Bitcoin’s security and transparency.

USDh Yield Recap

This week, USDh stakers locked in 14% APY. Meanwhile, your bank is still offering 0.5% APY, and maybe a free calendar if you ask nicely.

No forms, no long lines, just solid Bitcoin-backed yield. You know what to do.

Hermetica Hangout: Signal21

This week, we hosted Sats Ventures to dive into their approach to funding and supporting Bitcoin startups. We discussed how they identify high-potential projects, their investment strategy in BTCFi, and what the future holds for Bitcoin-backed innovation. It was a great session packed with insights for builders and investors alike, listen to the recording here.

Next week, we’re bringing on Signal21, a data platform on Stacks that’s making on-chain data more accessible. Don’t miss it! Follow our channels to stay updated.

Market Review

Crypto faced another turbulent week as Bitcoin and other currencies hit new lows early on. Bitcoin hit a local bottom of $76,600 on Tuesday before rebounding to $83,200.

Market carry rates (funding rates, basis spreads, and options premiums) plunged last week, but stabilized this week. Bitcoin funding rates remained flat or negative, with the steepest dips on Sunday and Tuesday. The equal-weighted basis spread declined by about 2% last week to 6%, holding steady this week. Bitcoin implied volatility dropped from 60.17% on Friday to 51.91% on Saturday before surging back to 62.75% by Tuesday.

The aggregated altcoin market cap remained flat week-over-week at $1.01T but dipped to $922B at its Tuesday low. Bitcoin dominance increased by 0.74% to 61.99% of the total crypto market cap.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $83,473

• 30-Day MA: $89,822

• 180-Day MA: $86,825

• 360-Day MA: $75,151

• 200-Week MA: $44,764

Bitcoin’s USD price has once again fallen below the 180-day (6-month) moving average (MA) after briefly dipping below this key long-term level three times last week. Bitcoin currently sits 1.28% above the 7-day MA, 7.22% below the 30-day MA, and 4% below the 180-day MA, signaling accelerating bearish momentum this week.

Despite the downtrend, Bitcoin remains above the 1-year (360-day) and 200-week MAs, though the 1-year MA may test these levels in the coming weeks. A bullish reversal would require Bitcoin to reclaim both short-term MAs and the 180-day MA from below.

Key downside levels for Bitcoin to watch include $82,500, $78,500, $76,000, $67,000, $65,000. On the upside, levels are $109,500, $105,000, $102,000, $99,500, $98,000, $96,000, $92,000, $89,000, $88,000, $86,000, $84,000.

The Bitcoin returns are as follows:

• 1 month: -17.11%

• 3 months: -19.99%

• 6 months: 36.96%

• 12 months: 13.55%

Bitcoin's annual trailing return dropped from 34.44% last week to 13.55% this week. Since 2015, Bitcoin's average annual return has been 56%, making the current 1-year trailing return 75% lower than the historical average.

This sharp decline is due to shifting reference points: one year ago, Bitcoin rose from $67,000 to $71,500, while this week’s price fell from $86,700 to $81,000. Additionally, returns from before the 2024 Bitcoin ETF rally have now exited the trailing annual dataset.

Liquidations

Bitcoin long liquidations totaled $136 million this week, down sharply from $736 million last week. While liquidations remained above average, they were lower compared to major liquidation events, such as early February, mid-December, and the past two weeks.

BTC ETF Flows

Net Bitcoin ETF outflows totaled $1.272 billion since last Friday, a sharp increase from $237 million last week. Spot Bitcoin ETFs have now seen five consecutive weeks of outflows.

Volatility

Bitcoin's implied volatility (DVOL) currently stands at 54.62%, down from its weekly peak of 62.75% on Tuesday. Relative to the past year, DVOL is now in the 35.8th percentile, marking a notable increase from a three-week low of just 2.7%. Over the last eight months, DVOL has predominantly fluctuated between 50% and 70%, and the current level places it near the lower end of this range.

Historically, DVOL tends to spike when a breakout, either to the upside or downside, appears imminent.

The recent uptick in DVOL began three weeks ago as Bitcoin approached the 91,000−88,000 level. This price range is significant because any drop below it could start triggering losses for options market makers, who are typically short volatility. Market makers often establish price ranges within which they operate comfortably. When prices fall sharply, they halt option sales and take steps to mitigate risk, such as buying back options or hedging with Bitcoin futures, perpetual contracts, or spot positions. Conversely, when DVOL is low, market makers are more confident selling options within the established range, contributing to a stabilization of volatility.

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 held steady, dipping slightly from 6.05% to 6.03% APR. Since the start of the month, it has declined by 2% APR.

The futures curve is in a slightly inverted contango, with the April 2025 contract showing the lowest APR at 4.88%, while the December 2026 contract has the highest at 7.23%. This week, the curve flattened as front-month maturities rose and back-month maturities fell, keeping the average basis spread steady. There is a 2.35% spread between the lowest and highest yielding maturity, up from 4.19% last week.

The current futures curve suggests a bearish near-term outlook compared to previous weeks. A normal contango, where front-month futures trade below later maturities, signals weak demand for spot buying. In contrast, a month ago (Figure 7), the curve was steeply downward-sloping, indicating strong demand.

The ideal bullish futures curve is a downward-sloping contango, where demand for near-term maturities exceeds the supply market makers (MMs) can source. MMs use front-month futures to hedge short-duration assets like weekly options, perpetuals, or spot holdings, helping them manage larger books while staying delta-neutral.

A higher basis spread for front maturities relative to distant maturities signals strong near-term bullish sentiment—something currently absent in the market.

Macro

On March 7, former President Donald Trump met with crypto leaders at the White House to discuss U.S. government support for the industry. Attendees included Brian Armstrong, Michael Saylor, Vitalik Buterin, and Anatoly Yakovenko. Trump expressed interest in fiat-backed stablecoins as a tool to expand U.S. dollar dominance and called for a stablecoin bill before the August congressional recess. Treasury Secretary Scott Bessent reinforced this stance, stating stablecoins would help maintain the U.S. dollar’s role as the world’s dominant currency.

The U.S. government sees stablecoins as a mechanism to reinforce dollar hegemony, particularly as foreign central banks rely on U.S. dollars and Treasuries for global transactions. Fiat-backed stablecoins, such as USDC and USDT, primarily hold U.S. Treasury bills as reserves, effectively financing the U.S. government. Adoption in emerging markets like Nigeria, Brazil, and Turkey is rising due to local currency instability, per a September 2024 report on stablecoins. This trend suggests the U.S. will continue promoting U.S. stablecoins and their supporting blockchain networks such as Solana and Ethereum.

Capital is moving into safe-haven assets such as the Yen, U.S. Treasuries, and gold, while tech stocks and crypto see outflows. Since taking office in January, Trump’s administration has emphasized domestic production, tariffs, and military repositioning. Tariffs have primarily targeted Canada, Europe and China, while countries like Japan have avoided major economic pressure.

The U.S. has pressured allies to increase military spending, with Europe pledging higher defense budgets after the U.S. temporarily reduced Ukraine aid last week. Germany relaxed its "debt brake" to fund rearmament, triggering a sharp rise in bond yields (German 10-year bund rates jumped 0.32% to 2.8%, the biggest single-day increase since 1990). This financial turbulence is spilling over into global markets, driving liquidity shifts.

A gradual unwinding of the Yen-dollar carry trade is ongoing, reversing a key yield strategy from the 2022 Federal Reserve tightening cycle. As U.S. rates fall and Japan raises its prime rate, traders are unwinding positions, strengthening the Yen while reducing dollar liquidity. This weakens the dollar’s value against other currencies, which could support U.S. assets, including crypto. However, the decline in global leverage also reduces liquidity, dampening risk appetite.

The Federal Open Market Committee (FOMC) meets on March 19. In January, Fed Chair Jerome Powell maintained rates but signaled future cuts, easing concerns about potential hikes from December’s hawkish stance. Recent market turmoil and lower-than-expected inflation (by 0.2%) suggest a dovish tilt is possible, but Powell is unlikely to cut rates immediately to maintain credibility.

Volatility indices have surged—the VIX (equity volatility) is at 22.36, its highest since December, while MOVE (Treasury bond volatility) sits at 106.19. Despite broader uncertainty, U.S. Treasuries have not seen significant inflows, as liquidity demand in Europe and the unwinding Yen carry trade have outweighed flight-to-safety buying.

Sincerely,
The Hermetica Team