IN THIS ISSUE

📣 USDh is live on Stacks
🎥 Hermetica Hangout: USDh x Stacks Launch Edition
💰 USDh yield recap
📈 Weekly market review

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USDh is Live on Stacks

In case you missed it – USDh is officially live on Stacks!

You can now swap any Stacks asset for USDh on Bitflow and Velar and stake it on our app to get up to 25% yield!

This is the starting pistol for a new era in Bitcoin DeFi. With Stack’s Nakamoto just around the corner, a decentralized financial system with cheap, fast, and secure transactions is ready to be unleashed.

USDh is a native SIP-010 token so no wrapping or bridging is required to use it today.

Get started now, buy USDh, stake it for up to 25% yield, and earn Hermetica Points for even more rewards.

Please also join us in celebrating the winners of our 500 USDh raffle. Check your wallet - the 5 winners have all received their payment.

Congratulations to all our winners, your USDh is on its way - we hope you enjoy up to 25% APY.

Hermetica Hangout: Special Edition

Missed Hermetica Hangout #11? No sweat, we’ve got the recap ready for you!

This week, we celebrated a game-changing moment for Hermetica and the Bitcoin ecosystem: the launch of USDh on Stacks.

We were fortunate to have unrelenting support from our friends at Bitflow, Velar, and Zest, the top leaders in Bitcoin DeFi, to discuss how USDh will supercharge the Stacks ecosystem: 

Can’t get enough of Hermetica? We get it. If you want to learn more about what Hermetica is building, join Jakob Schillinger, our Founder and CEO, with:

USDh Yield Recap

This week sUSDh holders earned a 17% APY return.

Take part in the USDh Stacks launch and earn up to 25% APY — stake USDh today!

Market Review

Bitcoin rallied again this week up to the $65,400 range, as the sideways market continues.

The moving averages (MA) in Figure 1 are:

• 7-Day MA: $63,995

• 30-Day MA: $59,241

• 180-Day MA: $63,318

• 360-Day MA: $54,241

• 200-Week MA: $39,376

Price is now above all moving averages after pausing for a few days at the 180-day MA. Breaking above the 180-day MA is a bullish price indicator.

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. 

Bitcoin has made its first higher high since the downtrend began, signaling a bullish outlook for future price action. A stronger confirmation would be breaking the next significant high at $70,000.

If the price continues to rise, potential resistance levels are at $68,000, $70,000, $72,000, and $74,000. On the downside, key support levels to watch are $64,000, $63,000, $60,000, $55,000, and $49,000, should momentum weaken.

Bitcoin returns are currently at:

• 1 month: +10.36%

• 3 months: +7.01%

• 6 months: -8.58%

• 12 months: +141.15%

Bitcoin’s annual returns remain strong at 141%, despite a decline in prices over the past 6 months. These high 1-year returns will persist until Q4 2023 and Q1 2024 prices drop off the trailing average. Typically, high trailing returns followed by a downtrend signal weak price performance in the near future. Profit-taking from last year's rally is still weighing on the market, adding downward pressure on prices. While other factors could offset this selling, the overall outlook from this signal remains bearish for Bitcoin.

BTC ETF Flows

Net BTC ETF flows since last Friday were positive $704 million.

Average daily flows were $141 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 causing them.

Volatility

Bitcoin's implied volatility (DVOL) is currently at 52.82%, sitting in the 36th percentile.

Despite rapid price increases this week, DVOL remains relatively low, indicating that price movements are likely within market maker options strangles. Since August, extremes in volatility have been steadily declining.

Typically, in traditional finance (TradFi), a sustained drop in “vol of vol” (volatility of volatility) signals a higher probability of price decline. However, Bitcoin’s market structure is different. Volatility spikes in Bitcoin often occur during both rapid price increases and declines. As a result, this low “vol of vol” could be bullish, suggesting that an upside breakout may be on the horizon.

Basis Spread

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

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

Front weeks and front month have fallen while price increased in the last week. Declining APR on shorter maturities indicates that there is less spot and options demand at these prices since dated futures are usually used for hedging by market makers. Declining demand might indicate that we are approaching a short-term top or slower upward price momentum.

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

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

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 not starting the rate cutting cycle earlier. So far, markets (especially precious metals and crypto, and speculative tech stocks) have reacted well to the 50 bp cut, but that could reverse quickly if signs of a financial crisis or recession begin to manifest in Q4.

S&P 500 implied volatility (VIX) currently stands at 15.36, while US Treasury implied volatility is at 91.14.

Sincerely,
The Hermetica Team