IN THIS ISSUE

📝 Stablecoin resiliency
🎥 Hermetica Hangout: Special Edition
💰 USDh yield recap
📈 Weekly market review

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Stablecoin Resiliency

Expanding on last week’s Stablecoin report from Castle Island Ventures, Gemini Institutional released a report focusing on Stablecoin activity.

Despite the sideways crypto market seen through most of 2024, stablecoins have continued to see persistent growth. 

Highlights from the report include:

We won’t spoil all the fun! Learn more in the full report here:

Hermetica Hangout: Special Edition

You won’t want to miss the next Hermetica Hangout — we have something very special planned!

Set your calendars for September 25 and get ready for something big. Follow the Hermetica X account and turn on notifications so you don’t miss a thing.

USDh Yield Recap

Making money never gets old, and USDh sure makes money. This week, sUSDh holders earned 12% APY.

Unlock your chance to earn up to 25% APY — stake USDh today!

Market Review

Bitcoin rallied within its medium-term downtrend up to the $64,250 range.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $60,801

• 30-Day MA: $59,295

• 180-Day MA: $63,556

• 360-Day MA: $53,526

• 200-Week MA: $39,148

The 180-day MA is just barely above the current price, while the short term 7-day, medium term 30-day, and long term 360-day and 200-week MAs are below price.

Price remains in a medium-term downtrend as long as it is below the 180-day moving average. Price bounced off the 180-day MA from below this week, which may indicate a local top. However, if price tests the 180-day MA again in the next two weeks and breaks through, it would indicate a trend reversal. As of writing, the estimated probability that price continues its long-term downtrend is 65%, with a 35% probability estimate for an uptrend reversal.

Should the price continue to increase, we can estimate the upside price resistance levels: $64,000, $68,000, $70,000, $72,000, and $74,000.

However, if price momentum continues downward, we estimate support levels at: $63,000, $60,000, $55,000, and $49,000.

Bitcoin returns are currently at:

• 1 month: +2.98%

• 3 months: -1.98%

• 6 months:  -6.45%

• 12 months: +137.06%

Annual returns on Bitcoin remain very high at 137% despite prices falling over the past 6-months. Bitcoin will likely not retrace its entire 1-year rally, but prices haven’t fallen quickly enough or in absolute value to reverse the downtrend. The probability of a trend reverse will increase If prices decline quickly or fall drastically in value over a long period of time.

While prices have declined, it has been slow enough that there is little incentive for traders to take a long position. Moreover, the market has yet to fully absorb the >100% rally from late 2023 and early 2024; it is likely that traders who took positions during that period will take profit. In the short term, these returns do not provide insight into a medium-term trend reversal.

BTC ETF Flows

Net BTC ETF flows since last Friday were positive $568.4 million.

Average daily flows were $113.68 million. Positive inflows were expected as a response to increasing prices this week. ETF flows tend to be a response to price moves, rather than the cause of them.

Volatility

Bitcoin's implied volatility (DVOL) is currently at 51.67%. DVOL is currently at the 30th percentile.

DVOL remains low despite the rapid price increases this week. This means price is likely within market maker options strangles.

Basis Spread

The basis spread, or the price of a futures contract over its spot price, is positive across all maturities, but the absolute yield across all maturities has fallen slightly and now sits around 7.5%.

The futures curve is in a slightly inverted contango with back month (October 25th) APR lower than all other maturities while back week (October 4th) and front month (September 27th) are higher. The basis rises in December and then flattens out there after. This yield curve is positively sloped, but with less than a 2% difference between the lowest and highest yielding maturities.

For Bitcoin this is a more bullish curve than last week. Ideally, front month would have the highest basis yield of any maturity.

Bullish Bitcoin futures curves are typically special contangos (Figure 6) where front month has the highest APR, and APR falls every maturity thereafter, but APR is positive along the whole curve.

This is the most bullish curve in the short term because market makers use front month as a substitute for perps and spot during periods of high demand.

Macro

This Wednesday the Federal Reserve announced a 50-basis point (bp) cut in the Fed Funds Rate, the minimum rate at which banks can lend to each other on a daily basis.

Prediction markets put the odds that the Fed would cut 50 bp at 53% and 25 bp at 47% before the announcement. By cutting 50 bp in one meeting rather than the more conservative 25 bp, Powell is signaling that he made a mistake in July by not starting the rate cutting cycle earlier. So far, markets (especially precious metals and crypto) have reacted well to the 50 bp cut, but that could reverse quickly if signs of a financial crisis or recession begin to manifest.

S&P 500 implied volatility (VIX) currently stands at 15.91, while US Treasury implied volatility is at 92.64.

Sincerely,
The Hermetica Team