IN THIS ISSUE

🛡️ Custodian attestations: April 2025
🔶 sBTC withdrawals are live
💰 USDh yield recap
☎️ Hermetica Hangout: Liquidium
📈 Weekly market review

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Custodian Attestations: April 2025

The proof is in - USDh’s April 2025 attestation is now available, confirming that the assets backing USDh remain securely held off-exchange in institutional-grade custody.

As of the snapshot:

• USDh supply: $5,608,450.35
• Copper custodied assets: $3,080,574.81
• Ceffu custodied assets: $1,960,000.00
• Redeeming Reserve: $571,409.21
• Total backing assets: $5,611,984.02
• Reserve Fund: $54,226.14
     • USDC: $50,149.59
     • USDh: $4,076.54
• Total % of USDh: 100.97%

Read the attestations from Copper and Ceffu for the full breakdown of Bitcoin backing USDh.

Even better, follow USDh’s backing, price, supply, and venue breakdown anytime, in real-time, using the new Transparency Dashboard.

sBTC Withdrawals Are Live

sBTC withdrawals are live — the two-way peg is complete.

Anyone can now convert sBTC on Stacks back to native BTC, unlocking full two-way functionality.

Seamless, trust-minimized movement of BTC into and out of Stacks is a major step forward for liquidity, integrations, and user confidence.

USDh Yield Recap

This week, USDh stakers locked in 9% APY—enough to grab a coffee (or three) at Token2049 and still have yield left over.

Didn’t make it to Dubai? Even better. You saved on flights and still earned the same 9%.

Hermetica Hangout: Liquidium

This week on Hermetica Hangout, we hosted Liquidium for a deep dive into Ordinals, Bitcoin lending, and how these building blocks shape the next phase of Bitcoin DeFi.

Next week, we’re bringing on Maestro, the first multichain app developer platform built for UTXO-based DeFi across Bitcoin, Cardano, and Dogecoin. Set your reminder, this one’s going to be packed.

Market Review

Bitcoin continued its upward momentum after breaking a four-month downtrend last week. Market rates (funding rates, basis spread, options premium, etc.) rose across the curve, with the most significant increases at the short end, signaling stronger spot demand.

Funding rates were volatile: strongly positive through Tuesday, then turning negative by Friday morning. The average (equal-weighted) basis spread climbed 2.09%, from 5.69% to 7.78%, marking the first time in two months that the spread exceeded 7%.
Bitcoin implied volatility (DVOL) stands at 47.74%, rebounding after hitting a multi-month low last week.

Aggregated altcoin market caps edged up from $1.03T to $1.04T week-over-week. Despite this, Bitcoin dominance increased by 0.48% to 64.86% of total crypto market cap—its highest level since early March and continuing an uptrend that began in December 2022. The long Bitcoin/short altcoin trade remains one of the best-performing and lowest-volatility strategies over the past two and a half years.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $95,004

• 30-Day MA: $87,316

• 180-Day MA: $92,380

• 360-Day MA: $77,924

• 200-Week MA: $46,494

Last week, Bitcoin broke its downtrend by rising above the 180-day moving average for the first time since March. The uptrend continued this week, with price breaching $96,000. Bitcoin is currently trading 1.8% above the 7-day MA, 10.77% above the 30-day MA, and 4.7% above the 180-day MA. Sustained price action above the 180-day MA in the coming weeks would confirm a new uptrend.

Trend Following

Returns for 7-day and 30-day long Bitcoin trend-following portfolios remain 13.39% below local highs set in late January, though performance has rebounded sharply over the past two weeks. At their recent low, two weeks ago, the portfolios were down 22.99%; the largest drawdown in long-biased trend strategies since late 2024, when they fell nearly 25%.

The drawdown reflected broad deleveraging across crypto markets, as traders unwound carry trades. However, bullish macro catalysts have helped reverse the decline. Traders are now re-leveraging and re-entering Bitcoin carry trades they had exited over the past two months.

Liquidations

Bitcoin long liquidations across all exchanges totaled $130.48M this week, down from an adjusted $140.32M last week. Weekly liquidations below $250M are typical during relatively quiet market periods.

BTC ETF Flows

Net inflows totaled $1.51B this week, down from last week’s $2.65B. Last week’s inflow marked the highest weekly inflow since November.

Volatility

Bitcoin’s implied volatility (DVOL) is currently at 47.74%, placing it in the bottom 7.1% of its range over the past year.

Over the past 10 months, DVOL has generally ranged between 50% and 70%, and it tends to mean-revert near the extremes of that range suggesting current levels could represent a local bottom. Unlike equities, Bitcoin often sees volatility expansion during both uptrends and downtrends, meaning continued price increases could be accompanied by rising volatility.

Basis Spread

The basis spread, or the price of a futures contract over its spot price, is positive across all maturities. The average (equal-weighted) basis spread rose 2.09% this week, from 5.69% APR to 7.78% APR, marking the first time since the week of February 28th that the average has exceeded 7%.

The futures curve is currently in an inverted contango, with the front-week contract (May 9th) offering the highest yield at 10.68% APR, followed by declining yields further out the curve. The spread between the highest and lowest yielding maturities widened to 3.85%, up from 3% last week. Yields rose across the curve, but the most significant moves occurred at the short end: the front-month contract (May 30th) jumped from 4.53% to 7.67% APR, while the December 2025 and March 2026 contracts saw more modest increases—from 6.77% to 7.11% and from 6.87% to 7.09%, respectively.

Market makers often hedge spot exposure using front-month contracts, while speculative traders typically focus on the long end. The sharp rise in short-end yields suggests increased demand for spot and short-duration options, prompting market makers to adjust their hedges. The inversion of the futures curve is a bullish signal and may indicate a re-entry into a sustained uptrend.

The ideal bullish futures curve is a downward-sloping contango, where demand for near-term maturities exceeds the supply that market makers can source in the short run. The January futures curve (Figure 9) illustrates this dynamic during a period of elevated spot demand.

Market makers typically use front-month futures to hedge short-duration exposures like front-week options, perps, and spot. Hedging with near-term contracts enables them to manage larger books while maintaining delta neutrality. The steeper the premium of front-month APRs relative to longer-dated maturities, the stronger the near-term bullish sentiment.

Macro

Since January 20th, U.S. geopolitical and economic policy has undergone a broad shift focused on domestic industrial support and strategic military realignment. Tariffs have emerged as the most visible component of this shift.

Although tariff announcements have periodically unsettled markets, subsequent revisions and scope reductions have helped stabilize sentiment. U.S. tariffs on Chinese goods peaked at 145%, while China responded with tariffs as high as 125% and imposed additional non-tariff barriers, such as bans on Hollywood films and restrictions on rare earth exports. he U.S. administration has now carved out exemptions for products like smartphones and semiconductors and is considering reducing tariffs to a range of 50–65%.

Beyond bilateral talks, both nations are seeking to build broader trade alliances. In mid-April, President Xi Jinping visited Vietnam and initiated regional trade discussions. On the U.S. side, there have been indications that countries aligning with its trade stance may benefit from tariff reductions.

Monetary policy developments have also played a significant role in shaping market dynamics. On March 19th, the Federal Reserve left interest rates unchanged but announced a significant reduction in the pace of quantitative tightening (QT), cutting monthly Treasury redemptions from $25 billion to $5 billion starting in April. During the Treasury basis trade unwind in mid-April, speculation emerged around potential emergency QE measures. However, markets steadied after the U.S. administration delayed tariff implementation.

The European Central Bank cut its policy rate by 25 basis points, citing concern over the inflationary and deflationary pressures from U.S. trade policy on European exports.

Looking ahead, the next Federal Open Market Committee (FOMC) meeting is scheduled for Wednesday. According to Polymarket, there is a 96% probability that rates will remain unchanged. While a rate cut is unlikely, adjustments to QT or limited quantitative easing (QE) measures may be considered to address pressure in long-dated Treasury markets. Such steps could help prevent further dislocations like those seen during the April basis trade collapse.

Futures markets are pricing in 75 basis points of rate cuts by year-end, up from 50 basis points before the tariff announcements. During the height of April’s tariff response, 10-year and 30-year Treasury yields rose to 4.52% and 5.03%, respectively. Since the 90-day tariff suspension, they have declined to 4.21% and 4.71%.

Despite the initial rush into cash due to tariff response, the U.S. Dollar Index (DXY) has declined 5.55% since the initial announcement, reaching a low of 97.92 on April 21st. It has since recovered modestly and is establishing support around 100. Historically, periods of falling asset prices combined with a declining dollar index have been early signals of an economic slowdown, as seen in 2001 and 2007. While equity markets have bounced back in recent days, the dollar has yet to fully recover.

Volatility across traditional financial markets remains elevated. The VIX and MOVE indices spiked in the wake of the tariff announcements and, while they have edged down, remain high relative to recent norms. The VIX currently stands at 23.80 and MOVE at 107.33—down from 26.46 and 108.28 last Thursday. Volatility is gradually receding but remains above pre-April levels.

Sincerely,
The Hermetica Team