🗞️ What Comes After CLARITY
🏷️ The Cost of a Yield Ban
💰 Yield Recap
📈 Weekly Market Review

The big news this week was CLARITY failing to advance in the Senate.

If you’re wondering what comes next, I have your answer. The SEC and CFTC will take on more of the work, picking up where Congress left off. Two days after the vote, the SEC issued its Innovation Exemption for onchain trading of tokenized U.S. stocks, an early indication of how rulemaking can continue without legislation.

A second story that landed on my desk this week was the White House’s latest analysis on stablecoin yield. It was largely overshadowed by CLARITY, but the numbers caught my attention.

CEA’s baseline model found that banning stablecoin yield would increase total bank lending by just 0.02%, while producing roughly $800 million in annual net welfare losses. The estimated cost outweighed the lending benefit 6.6 to 1.

U.S. regulators are already adapting to a world without CLARITY.

Two days after the Senate vote, the SEC issued an Innovation Exemption allowing certain tokenized U.S. stocks to trade onchain through permissioned venues. SEC Chair Paul Atkins directly linked the move to Congress voting against CLARITY.

CLARITY fell 11 votes short of the 60 needed to advance amid disagreements over ethics provisions, stablecoin rewards, and banking concerns.

The next phase of U.S. crypto rulemaking will move through the SEC and CFTC, which can continue advancing digital-asset rules under their existing authority. The tradeoff is that agency rules are less durable because future administrations can change them more easily than laws passed by Congress.

These developments do not change our focus. USDh and hBTC continue to earn under the same risk controls and transparency framework, while regulatory developments remain under active review. 

Work continues on new products and upgrades to the infrastructure behind our existing ones. The next update is coming soon.

Keep an eye on your inbox. You will want to see this one.

One of the strongest arguments against stablecoin yield is losing ground.

The White House Council of Economic Advisers published a new analysis examining whether banning stablecoin yield would meaningfully protect bank lending. Its baseline model found just $2.1 billion in additional loans, equal to 0.02% of total bank lending. For community banks, the increase was about $500 million, or 0.026%.

The cost to stablecoin holders was much higher. CEA estimates an annual net welfare loss of ~$800 million, with costs exceeding the lending benefit by 6.6 to 1.

We believe regulation should protect consumers and financial stability.

The treatment of stablecoin rewards should depend on evidence about their effect on bank funding and credit creation. If those effects pose a material risk, regulation should address it directly. A blanket restriction requires a stronger case than the fact that stablecoins compete with bank deposits.

Competition from an alternative that offers savers better terms is not, by itself, a threat to financial stability.

How to win the week:

1. Own USDh and hBTC
2. Let both compound daily
3. Finish with more than you started with

This week’s numbers are in.

Bitcoin climbed back above $80,500 after briefly trading below $76,000. The earlier price drop was driven by three factors: the CLARITY Act failing to advance in the Senate, spot Bitcoin ETFs recording $746.3 million in combined outflows across Tuesday and Wednesday, and the Fed raising rates by 25 bps to 3.75%-4.00%.

Pressure eased Thursday as Brent fell, the 10-year Treasury yield moved down from 5.01% to 4.93%, and spot Bitcoin ETFs returned to $159.5M of net inflows. The recovery also gained strength from short covering. As BTC moved back above the $80,300 area that had capped recent attempts higher, short sellers were forced to buy back exposure, adding fuel to the move.

Data Summary:

Simple Moving Averages (SMAs) in Figure 1:

Bitcoin is trading around $80,533, just above the 360-day SMA near $80,314. Near-term support sits at $80,000-$80,300, followed by $77,300-$78,100 around the 30-day and 7-day SMAs. Resistance remains at $81,000-$82,200, where Bitcoin recently peaked near $82,163. A sustained move above $82,200 would clear the recent high and much of that overhead supply, opening the $84,000-$85,000 price zones. Until then, BTC has reclaimed the 360-day SMA but is still testing the same resistance zone that has capped the recovery.

Net outflows totaled $426.81M this week.

Spot Bitcoin ETF flows remained negative for a second consecutive week, though outflows eased slightly from last week’s $462.73M. Cumulative net inflows now stand at $54.73B, while total spot Bitcoin ETF net assets sit at $96.25B. September has also flipped negative at -$119.40M month-to-date, down from +$320.71M at the end of last week.

DVOL fell to 35.79% from roughly 39.59% last week, extending the decline in Bitcoin implied volatility despite a busy macro week. Short-dated BTC implied volatility traded around 38%-39% into the FOMC, with 7-day options carrying a slight premium over 14-day maturities. After the meeting passed without a sustained volatility shock, that event premium was quickly repriced lower, falling into the mid-30s. 

BTC is back in the $78,000-$80,000 range, with the largest concentration of call open interest around $80,000. That can keep price anchored near the area as options dealers hedge around large positions.

The equal-weighted basis across observed maturities rose to 4.60% APR from 4.33% last week. The curve remains positive across all visible maturities, with December 25 at the high of 5.03% and September 25 at the low of 3.53%, leaving a spread of 1.50 percentage points.

Carry improved across most maturities, led by the front end. October 2 rose to 4.56% from 3.79%, while October 30 increased to 4.79% from 4.46%. The broader rise in basis points to stronger futures demand, but leverage still looks restrained.

The Fed raised rates for the first time in three years, lifting the target range 25 bps to 3.75%-4.00% in a unanimous vote. Updated projections put the year-end fed funds rate at 4.1%, with headline PCE at 3.7%, core PCE at 3.4%, GDP growth at 2.3%, and unemployment at 4.1%. The economy is still giving the Fed room to stay restrictive.

Energy kept inflation pressure elevated. Brent briefly reached $109.80 after disruption to Saudi Arabia’s East-West pipeline, helping push the 10-year Treasury yield to 5% for the first time since 2023. Oil later eased toward $103-$104 as repair expectations improved. U.S. diesel averaged $6.29 per gallon, roughly 68% above a year earlier, keeping pressure on freight and goods costs.

AI remains part of the same macro picture. Hyperscaler borrowing, data-center construction, power demand, and commodity use are increasingly feeding into long-term yields and capital spending. For Bitcoin, the week was a test of whether price could absorb tighter monetary conditions. BTC fell into the mid-$70,000s as oil and yields rose, then recovered above $80,000 as both eased. The key macro question is now whether energy and long-end yields stay below this week’s highs while Bitcoin holds the $80,000 area.

Sincerely,
The Hermetica Team