IN THIS ISSUE

📣 USDh on CoinGecko & DefiLlama
👁‍🗨 Stablecoin outlook
🏦 Big players back sBTC
💰 USDh yield recap
🎙️ Hermetica Hangout: Sats Ventures
📈 Weekly market review

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USDh on CoinGecko & DefiLlama

Last week, Bybit was hacked for over $1.3B in ETH — a stark reminder that where assets USDh is now listed on DeFiLlama and CoinGecko. These listings bring the ability to track real-time: 

USDh presence is expanding across DeFi with more listings on the way. Add USDh to your CoinGecko portfolio so you can see the growth as it happens.

Stablecoin Outlook

The February 2025 custodian attestation report from all integrated custodians is now According to Allium, stablecoins now process over 100 million transactions per month, moving approximately $600 billion in value. As adoption grows, so does regulatory scrutiny, with initiatives like the GENIUS Act tightening oversight of fiat-backed stablecoins.

Despite being the hardest asset, Bitcoin has historically played little role in the stablecoin market. USDh is changing that—bringing the first yield-bearing dollar on the new digital gold standard.

Learn more about the future of stablecoins in the full report from Grayscale.

Big Players Back sBTC

Jump Crypto, UTXO, Asymmetric Research, and SNZ have joined as sBTC investors, with an accumulated volume of over $250M in BTC now deployed. The Stacks ecosystem is gaining serious traction, and sBTC is actively being used across Stacks DeFi.

One of the top use cases is using sBTC as collateral to borrow USDh on Zest Protocol, allowing Bitcoin holders to unlock liquidity without selling.

The big players are in, are you? 👀

USDh Yield Recap

Reports confirm that USDh stakers show alarming signs of:

Cause? 5% APY. Effect? Easy money.

Hermetica Hangout: Sats Ventures

Get ready for a big one next week: Sats Ventures is joining us. As an early-stage fund focused on Bitcoin, they’re backing the builders working hard to shape the future. This is one you don’t want to miss.

In the meantime, join Jakob, our Founder and CEO, as he talks USDh on the podcast circuit:

💰 Jakob on Cryptoconomy
🪑 Jakob on Leather Lounge

Follow our X and turn on notifications to get ready for the next Hangout.

Market Review

This week saw significant volatility across markets, especially in crypto. Bitcoin bottomed at $78,000 last Friday before rebounding to $88,000, with intraweek realized volatility hitting 21% ($17,000). A major 24-hour rally and reversal—the largest in years—was triggered by announcements from the Trump administration.

On Sunday, Trump posted on Truth Social that the US Crypto Strategic Reserve (SCR) would include XRP, SOL, and ADA, sparking rallies of 30%, 25%, and 70%, respectively. Later, he clarified that BTC and ETH would also be included, pushing them up over 10%. However, the rally reversed when Trump announced tariffs—25% on Canada and Mexico, 10% on China—set to take effect Monday. These were later postponed to April 1st under industry pressure.

Thursday evening, Trump signed the SCR executive order but without government crypto purchases. The order prevents the federal government from selling seized crypto but requires budget cuts for any acquisitions. With Congress unlikely to approve spending reallocations and the Supreme Court blocking a $2B foreign aid cut, federal crypto purchases remain improbable.

Despite setbacks, Trump is hosting a crypto summit today with key industry figures, including Brian Armstrong, Michael Saylor, and Vitalik Buterin. Market reaction is expected.

Bitcoin funding rates remained negative or flat, with the average basis spread dropping 2% to 6% since last Friday. Implied volatility surged from an eight-month low of 46.16% on February 24th to 62.66% by Tuesday. Altcoin market cap dipped from $1.05T to $1.01T.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $88,936

• 30-Day MA: $93,211

• 180-Day MA: $85,705

• 360-Day MA: $74,879

• 200-Week MA: $44,624

Bitcoin reclaimed its 180-day moving average (MA) after briefly dipping below it three times this week. It now sits 0.6% below the 7-day MA and 5% below the 30-day MA, an improvement from 8% and 14% last Friday indicating a slowdown in bearish momentum despite market turbulence.

Bitcoin remains above the 1-year (360-day) and 200-week MAs, though the 1-year MA may be tested if the $88,000 level doesn't hold. A sustained reversal requires reclaiming both short-term MAs and the 1-year MA from below.

Bitcoin downside levels: $88,000, $86,000, $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, 89,000

The Bitcoin returns are as follows:

• 1 month: -6.81%

• 3 months: -9.80%

• 6 months: 64.26%

• 12 months: 34.44%

Bitcoin's annual trailing return dropped from 38.19% last week to 34.44% this week, well below its 10-year average of 56%. The decline is driven by last year’s price surge from $51,000 to $61,000, followed by this week’s drop from $96,000 to $84,000. With Bitcoin’s March 2024 rally to $74,000 set to roll into the calculation, trailing annual returns are likely to decline further over the next three weeks.

Liquidations

Bitcoin long liquidations totalled $736 million this week, down from $3.36 billion last week across all exchanges. While still above average, liquidations were in line with levels seen in early February and mid-December. Despite the sharp price swings on Sunday and Monday, liquidations have been declining week-over-week.

BTC ETF Flows

Net BTC ETF outflows totaled $235.6 million since last Friday, a sharp decline from the record $2.77 billion in outflows the previous week.

Volatility

Bitcoin's implied volatility (DVOL) sits at 55.22%, down from a peak of 64.66% on Tuesday. It currently ranks in the 38.8th percentile over the past year, rebounding from a two-week low of 2.7%.

For most of the last eight months, DVOL has ranged between 50% and 70%, typically spiking during major market events. While past spikes quickly faded, DVOL has trended upward since February 25, peaking this past Tuesday. The increase began as Bitcoin approached the $91,000–$88,000 range, where options market makers faced potential losses. This week, market makers are establishing a new range around $90,000.

Basis Spread

The basis spread, or the price of a futures contract over its spot price, is positive across all maturities. Over the past week, the average basis spread declined by 25%, from 8.03% APR to 6.05% APR. Since the start of the month, it has fallen by 1.98% APR.

The futures curve is in a normal upwards sloping contango with the front-week contract (March 14) yielding the lowest APR at 3.42%, while the longest-maturity contract (December 26) has the highest APR at 7.61%. Despite some distortions in curve shape, the overall structure is relatively flat. The spread between the lowest and highest-yielding maturities has widened to 4.19%, up from 0.79% last week.

The current futures curve suggests a bearish near-term outlook, especially when compared to recent weeks.

An upward-sloping normal contango, where the front end of the curve is below the later maturities, reflects weak demand for spot buying. In contrast, the curve from a month ago (Figure 7) displayed a steep downward-sloping contango, indicating higher demand.

The ideal futures curve is downward-sloping, with stronger demand for nearer maturities than can be supplied by market makers in the short term. Market makers use front-month futures to hedge short or current-duration assets (such as perpetual contracts or spot), enabling them to borrow and sell more spot to balance the market while maintaining delta neutrality. As such, a higher basis spread for front-month contracts relative to longer maturities signals a more bullish market outlook in the near term.

Macro

Since January 20th, U.S. geopolitical policy has shifted toward strengthening domestic production through tariffs and reallocating military assets. Tariffs have been a key tool in this strategy, used as a negotiating tactic to secure economic and military concessions from U.S. allies. Some countries, such as Japan, have largely avoided tariffs due to their alignment with U.S. geopolitical interests.

The U.S. has also encouraged its allies to increase military spending. Europe's defense posture has shifted significantly following the reduction of U.S. support for Ukraine. In response, European nations have committed to ramping up military expenditures. Germany, for example, has agreed to ease its "debt brake" policy—initially introduced in 2009—to finance military expansion. This decision led to a sharp selloff in German 10-year bonds, with rates rising from 2.48% to 2.8% in a single day, marking the worst one-day decline since 1990. The resulting financial turbulence has driven investors toward safer assets such as U.S. Treasuries and the Japanese yen.

Recent market shifts have also impacted the yen-dollar carry trade, a strategy in which investors borrow yen at low interest rates to invest in higher-yielding U.S. assets. As the Federal Reserve lowers interest rates while the Bank of Japan cautiously raises its prime rate, the trade has become less attractive, leading to an unwinding of positions. This has strengthened the yen, weakened the dollar, and reduced global liquidity.

Equity market volatility has risen since the December 18th Federal Open Market Committee (FOMC) meeting, with notable spikes on January 13th, January 25th, and February 3rd, coinciding with key geopolitical and economic events. The volatility index (VIX) currently stands at 24.86, while the Treasury bond implied volatility index (MOVE) is at 108.95.

Following the December FOMC meeting, 30-year U.S. Treasury yields initially rose from 4.31% to 4.97% by January 10th but have since declined to 4.57%. Despite recent market turbulence, U.S. Treasuries have not been the primary safe-haven asset, as liquidity from the unwinding yen-dollar carry trade is flowing into the yen instead.

Sincerely,
The Hermetica Team