First Bitcoin-backed synthetic dollar to launch with 25% yield

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As a researcher with experience in the crypto and blockchain space, I find Hermetica’s announcement of the first-ever Bitcoin-backed synthetic United States dollar with yield-generating capabilities to be an intriguing development in the world of decentralized finance (DeFi) on Bitcoin. The potential for Bitcoiners to hold and earn yields on their U.S. dollars without relying on traditional banking systems or being exposed to non-Bitcoin-related products is a significant step forward.

In a recent announcement, Hermetica unveiled the debut of the first Bitcoin-collateralized synthetic US dollar with earning potential in the realm of decentralized finance (DeFi), marking a groundbreaking advancement.

As a researcher, I’ve come across some intriguing news: Hermetica has revealed plans for the upcoming launch of a new synthetic dollar dubbed USDh, scheduled for release in June. This innovative currency is said to provide users with impressive returns, reaching up to an enticing 25%.

According to Jakob Schilliger, founder and CEO of Hermetica Labs, the introduction of the new synthetic dollar offers Bitcoin users the convenience of keeping and generating returns on their US dollars, all without relying on traditional banks or investing in non-Bitcoin assets.

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Schillinger told CryptoMoon:

“USDh will play a pivotal role in bringing increased liquidity and new use-cases to Bitcoin DeFi, allowing Bitcoiners to trade, lend, and transact in a dollar asset that is fully backed by Bitcoin.”

As a crypto investor, I’m excited about the emerging possibilities of Bitcoin DeFi, and Hermetica is one protocol leading the charge on the Stacks network. This innovative DeFi project is designed specifically for Bitcoin’s native ecosystem, expanding its capabilities to include decentralized finance solutions that were previously only available on other blockchains.

Is 25% yield sustainable in the long term?

Two months ago, Ethena introduced the first dollar synthesis based on Bitcoin (BTC), following closely upon the heels of USDe’s debut and its controversial 27.6% yield for investors, sparking significant apprehension regarding the long-term viability of the protocol.

The substantial difference between Hermetica’s USDh 25% annual percentage yield and Anchor Protocol’s previous 20% yield on UST could raise equivalent apprehensions, given the collapse of Terra in May 2022.

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As a analyst, I’ve learned from Hermetica’s CEO that the company’s yield is sustainably sourced through futures funding rates. To clarify, this means that the income generated derives directly from the prices set in these financial contracts for future delivery of assets.

“This Bitcoin-native yield fluctuates with the market’s demand for long leverage. Our backtest data from January 2021 to March 2024 shows an average APY of 11.71%. In the 2022 bull market, the annual return was 26.11%.”

Schillinger added that the demand for Bitcoin futures will keep USDh yield sustainable:

“The yield is sustainable due to the structural demand for long leverage in the Bitcoin futures markets.”

As a blockchain analyst, I’ve noticed an emerging trend where protocols are integrating more functionalities and Decentralized Finance (DeFi) applications around Bitcoin, the robust and secure blockchain network. In my opinion, Ordinals have been a pivotal development in driving growth within the Bitcoin Finance (BTCFi) ecosystem. I made this assessment after closely examining their impact.

“We believe Bitcoin DeFi will match and eclipse the size of Ethereum DeFi in the next 5 years. We’re already seeing months where Ordinals trading volumes are higher than volumes for Ethereum and Solana NFTs combined. With over $1T in latent BTC capital, Bitcoin DeFi is primed for explosive growth.”

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2024-05-06 16:21