IN THIS ISSUE

🟢 USDh dominates Stacks
💵 The state of stablecoins
💸 USDh yield recap
☎️ Hermetica Hangout: Jackbinswitch
📈 Weekly market review

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

USDh Dominates Stacks

We recently listed USDh on DeFiLlama, and it wasted no time bringing results.

USDh now commands 75.79% of the Stacks stablecoin market, solidifying its position as the largest and most utilized Bitcoin-backed stable asset in Bitcoin DeFi.

With adoption surging across DEXs, lending markets, and liquidity pools, USDh is quickly becoming the go-to standard for stability and efficiency in the Bitcoin economy.

The State of Stablecoins

According to a joint report by Dune and Artemis, stablecoins continue to find global adoption.

Total stablecoin supply has reached $214B, driving $35T in annual transactions, double Visa’s volume, while active addresses have surged 53% to 30M.

Most decentralized stablecoins have expanded on Ethereum, with their total supply increasing from $5B to over $12B.

On Bitcoin, decentralized stablecoins are still emerging with USDh at the forefront; fully backed by BTC and designed to power Bitcoin DeFi.

USDh Yield Recap

USDh stakers earned 5% APY this week.

The only strategy? Stake USDh and go outside.

Hermetica Hangout: Jackbinswitch

This week, we hosted Signal21 and explored how they're making on-chain data more accessible on Stacks. A packed session with insights for traders, data nerds, and DeFi builders alike, catch the recording here.

Next week, we’re bringing on the leader of the ROO Bros, Jackbinswitch. Expect alpha, laughs, and maybe a few kangaroo memes. Don’t miss it! Follow our channel to stay up to date.

Market Review

Bitcoin dominance declined by 0.72% to 61.54% of the total crypto market cap, while aggregated altcoin market capitalization edged up week-over-week from $1.01T to $1.04T.

Market carry rates (funding rates, basis spread, options premium, etc.) remained flat this week and last, following a sharp decline the previous week. Funding rates were net negative, particularly so ahead of the FOMC meeting on Wednesday. The equal-weighted average basis spread fell from 8% to 6% two weeks ago and declined further to 5% this week. Meanwhile, Bitcoin implied volatility plunged again, dropping from 55.43% to 49.15% from Friday open to Friday open.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $84,155

• 30-Day MA: $86,945

• 180-Day MA: $87,493

• 360-Day MA: $75,489

• 200-Week MA: $44,975

Bitcoin remains 3.56% below its 180-day (6-month) moving average (MA) after breaking below this key long-term level two weeks ago. It is currently 0.26% above the 7-day MA but 2.95% below the 30-day MA, while still holding above the 1-year (360-day) and 200-week MAs. The downtrend persists until Bitcoin reclaims both short-term MAs and the 180-day MA from below.

Bitcoin downside levels: $84,000, $82,500, $78,500, $76,000, $67,000, $65,000

Bitcoin upside levels: $109,500, $105,000, $102,000, $99,500, $98,000, $96,000, $92,000, $88,000

Trend Following

Returns for Bitcoin 7-day and 30-day long trend-following portfolios have fallen 15.9% from local highs set in late January, marking the steepest drawdown since April 2024, when losses exceeded 25%. Long trend strategies remain a popular way for traders to gain crypto exposure while reducing portfolio volatility.

Traders often leverage these portfolios to maximize gains during strong rallies, reinforcing upward momentum. However, when Bitcoin’s returns dip below the cost of leverage for extended periods, these positions begin to unravel. As traders struggle to cover interest expenses, forced liquidations drive prices lower, triggering a cascading effect of further liquidations and price declines. Equilibrium is reached when new or non-leveraged traders step in to absorb the forced sales.

The ongoing drawdown in trend strategies signals a period of deleveraging across crypto markets. With nearly two months of persistent liquidations clearing out much of the leverage in Bitcoin, the market is now relatively unburdened by debt. This sets the stage for a releveraging event, where a bullish macro catalyst—such as favorable policy signals from the White House—could restore confidence and drive a price recovery.

Liquidations

Bitcoin long liquidations across all exchanges have reverted to their long-term baseline of $205.04 million, down sharply from $682.43 million last week.

BTC ETF Flows

Net inflows since Friday, March 14, totaled $702.5 million, marking a sharp reversal from last week’s $1.272 billion net outflow. Bitcoin ETFs have now ended a five-week streak of outflows.

Volatility

Bitcoin's implied volatility (DVOL) currently stands at 49.15%, placing it in the 8.7th percentile relative to its average level over the past year. Over the last 30 days, DVOL has essentially round-tripped, now sitting near the lower end of its typical 50%-70% range observed over the past eight months. DVOL tends to spike when a range breakout becomes likely, as seen during Bitcoin’s new all-time high on Inauguration Day, the Nvidia market crash, and the tariff scare—each followed by a new low in implied volatility.

One month ago, DVOL began rising as Bitcoin approached the $91,000-$88,000 range from above, a critical level where options market makers start incurring losses. Market makers, typically short volatility, build option structures within defined price bands, creating sticky high- and low-volatility zones that can persist for months. The $70,000 level is one such high-volatility price point. As Bitcoin approached this level from above two weeks ago, option prices spiked sharply, reflecting potential losses for market makers below that threshold.

At these high-volatility price levels, market makers typically stop selling options and instead manage risk by buying back options or hedging through Bitcoin futures, perpetual swaps, or spot positions.

Basis Spread

The basis spread, or the price of a futures contract over its spot price, is positive across all maturities. The average basis spread declined 1% week-over-week from 6.05% APR last week to 4.97% APR this week. The average basis spread declined 3% APR since the start of the month.

The futures curve is in a slightly inverted contango with the back month contract (April 25th) APR slightly lower than the March 28th front month contract but well below the longer duration contracts. The futures curve fell 1% across all maturities but did not change its shape week-over-week. There is a 2.54% spread between the lowest and highest yielding maturity, up from 2.35% last week.

The current curve is indicating a bearish near-term outlook relative to the curves of past weeks.

An upwards sloping normal contango, or where the front part of the curve is below more distant maturities, signals weak demand for spot buying. By contrast, the futures curve from a month ago (Figure 10) was in a steep downward sloping contango which indicates high demand.

The ideal futures curve is a downward sloping contango where demand for closer maturities outstrips the supply market makers can obtain in the short run. Market makers use front month futures to hedge short/current duration assets such as front week options, perps, or spot. Using front maturities allows MMs to manage larger books while maintaining delta neutrality. The higher front maturity APR is over distant maturities the more bullish the market is in the near term.

Macro

Since taking office on January 20, Trump has implemented policies focused on increasing U.S. domestic production through tariffs and repositioning military assets in the Middle East and Western Pacific. Tariffs have been used as a tool in trade negotiations, with some countries, such as Japan, avoiding them due to policy alignment with U.S. strategic objectives.

In Europe, Trump’s temporary suspension of material support for Ukraine has been followed by increased commitments from European nations to expand defense budgets. Germany recently relaxed its “debt brake” to increase military spending, leading to a sharp selloff in German bonds, with 10-year bond yields rising 0.32% in a single day—the largest one-day movement since 1990.

At the March 19 FOMC meeting, the Federal Reserve maintained interest rates and announced a reduction in quantitative tightening, lowering monthly Treasury redemptions from $25B to $5B starting in April. Fed Chair Powell cited economic strength and a gradual decline in inflation but acknowledged uncertainty in inflation trends. The S&P 500 rose 1%, and Bitcoin increased 5% following the announcement.

Equity market volatility (VIX) has retraced half of its recent breakout, while Treasury bond volatility (MOVE) remains in a long-term downtrend. Since December, 30-year Treasury yields have risen from 4.31% to a peak of 4.97% on January 10 before settling at 4.57%. Recent movements in Treasury yields have coincided with changes in global liquidity demand and currency market dynamics.

As of now, the VIX and MOVE indices are at 20.09 and 106.19, respectively.

Sincerely,
The Hermetica Team