🪙 A Dollar Not Backed by Debt
🗞 Every USDh Accounted For
💰 Yield Recap
📈 Weekly Market Review

This week brings an eye-opening look at where stablecoin growth is directing capital.

Did you know the two largest stablecoin issuers added ~$200 billion in Treasury holdings over the past five years? Legacy stablecoin adoption is becoming a major funding channel for U.S. debt, reinforcing a model where holders bear the dollar’s inflation risk and issuers retain the yield earned on the reserves.

USDh brings a new model to market, shaped by Bitcoin’s ethos of holder-aligned economics. Its reserve economics are built around Bitcoin capital markets, with the resulting yield flowing back to holders.

Transparency is part of the design. September’s attestation is now live, confirming USDh remained fully backed, with reserves held in institutional custody and independently verified by Copper.

Legacy stablecoins are becoming a major funding channel for U.S. debt.

The San Francisco Fed estimates that the two largest issuers added ~$200 billion of Treasury holdings over the past five years and could reach ~$400 billion by 2030 if current trends continue.

Every additional dollar of Treasury-backed stablecoin supply creates new demand for U.S. government debt, turning stablecoin growth into a direct source of financing for the Treasury market.

There is a paradox in that model. Stablecoin users hold the dollar and bear its inflation risk, while issuers earn interest from lending those dollars to the U.S. government. As stablecoins grow, those reserves help finance a fiscal system that, under persistent deficits, can contribute to inflationary pressure.

USDh is a different kind of dollar, built around a system where holders benefit. Its reserve economics are built on Bitcoin capital markets, including BTC basis and Bitcoin-backed credit, with the resulting yield accruing to holders.

Digital money should work for the holder, not just the issuer.

Nine months into 2026, USDh has remained fully backed.

USDh’s September 2026 attestation is live, providing the latest monthly verification of the assets backing the protocol. Reserve positions remain transparently accounted for and independently verifiable.

In summary, as of the snapshot time:

See the full breakdown of USDh’s backing in the published attestations.

For the week:

hBTC delivered 1.0%
USDh delivered 8.0%

Both products continued to generate yield as intended.

Thank you for your attention to this matter.

Bitcoin recovered toward $86,500, approaching last week’s $87,000 high after trading around $83,000-84,000 earlier in the week. BTC remains above its 7-day SMA near $84,400 and 360-day SMA around $79,100, keeping the recovery intact despite several days of consolidation.

ETF demand slowed sharply, with U.S. spot Bitcoin ETFs recording $51.25M of net inflows compared with $2.39B last week. Futures activity strengthened as price recovered, with open interest rising by roughly 8,900 BTC over the past 24 hours. That suggests leverage is returning to the market, although open interest alone cannot determine whether the increase came from new longs or new shorts.

Data Summary:

Simple Moving Averages (SMAs) in Figure 1:

Bitcoin has reclaimed $84,400–$85,000, which now needs to hold as near-term support. Below that, $82,600–$83,400 is the stronger support zone, covering this week’s lows and repeated buying during the recent consolidation. Resistance remains at $87,000–$87,500, around September’s highs. A sustained break above that area would strengthen the recovery, while rejection would keep BTC inside its recent range.

Deeper support sits at $79,000–$81,100, spanning the 360-day and 30-day SMAs. The immediate test is whether buyers can defend the reclaimed $84,400–$85,000 zone and push through September’s highs without another retreat into the low-$83,000s.

Net inflows totaled $51.25M this week.

U.S. spot Bitcoin ETF inflows slowed by 97.7% from $2.25B over the equivalent period last week. September 30’s $148.69M outflow ended nine consecutive positive sessions, before $102.67M of inflows returned on October 1. Cumulative net inflows now stand at $57.60B, while total net assets reached $109.34B. ETF demand remained positive overall, but provided substantially less buying support than the previous week. September closed with $2.65B of net inflows.

DVOL rose slightly to 36.17% from 35.30% last week, but Bitcoin’s expected 30-day volatility remains near the bottom of its one-year range. Options markets have added only a modest premium despite higher Treasury yields, oil prices and geopolitical uncertainty.

The low reading still reflects Bitcoin’s recent consolidation and the drop in short-term expiry premiums after September’s quarterly settlement. Near-term volatility fell after expiry, while longer-dated pricing changed little. Macro uncertainty has since pushed implied volatility slightly higher, but not enough to suggest the market is expecting significantly larger price swings.

Bitcoin futures basis ranges from 4.50% to 5.23%, rising from the October 9 contract into November and December before flattening into March 2027. Futures remain priced above spot, but the relatively tight range suggests demand is steady rather than aggressive.

The curve has normalized following September’s quarterly expiry, with the elevated front-end premium fading. Beyond November, basis is broadly flat, indicating little increase in demand for leveraged futures exposure at longer maturities.

Treasury yields hit fresh highs before retreating on Thursday. The 10-year touched 5.34%, its highest since 2002, then fell toward 5.21% as expectations for further tightening softened. Fed Vice Chair Philip Jefferson said the next policy move may take more time, while still warning of upside inflation risks. Yields above 5% increase the return available in Treasuries, raising the hurdle for capital to move into BTC.

Oil also stayed elevated. Brent settled at $105.28 after Washington rejected Iran’s proposal for a temporary reopening of the Strait of Hormuz. Persistent supply disruption keeps fuel and transport costs high, which can feed into inflation and make it harder for the Fed to lower rates.

AI investment is becoming part of the same rates story. Jefferson said the infrastructure buildout is supporting growth while also raising costs in related goods and services. With core PCE at 3.0% year-on-year and real consumer spending up 0.6% in August, demand remains strong enough to keep inflation pressure alive. Strong investment spending and high energy costs can keep rates elevated even as other parts of inflation improve, leaving Bitcoin with a tighter liquidity backdrop.

Sincerely,
The Hermetica Team