Hermetica Unveils First Bitcoin-Backed Synthetic Dollar Offering 25% Yield

Hermetica Labs announces the debut of USDh, a pioneering Bitcoin-based synthetic United States dollar featuring lucrative yield-generating capabilities. But can the promised 25% yield be sustained over time?

In a groundbreaking move for Bitcoin-native decentralized finance (DeFi), Hermetica introduces USDh, the world’s inaugural Bitcoin-backed synthetic dollar set to launch in June. According to Hermetica’s statement to Cointelegraph, USDh promises yields of up to 25%.

Founder and CEO Jakob Schillinger describes USDh as a pivotal addition to Bitcoin DeFi, enabling users to hold and earn yield on their U.S. dollars directly linked to Bitcoin without reliance on traditional banking systems or exposure to non-Bitcoin assets.

The launch follows Ethena’s introduction of USDe, which offered holders a notable 27.6% yield, sparking discussions about sustainability. With USDh’s 25% annual percentage yield (APY), similar concerns arise, especially considering the collapse of Anchor Protocol’s 20% yield on TerraUSD (UST) in May 2022.

Schillinger addresses sustainability concerns, attributing the yield to futures funding rates and noting a backtested average APY of 11.71% from January 2021 to March 2024. He emphasizes that market demand for Bitcoin futures will underpin USDh’s yield, ensuring its longevity.

The advent of USDh aligns with the burgeoning Bitcoin DeFi movement, propelled by initiatives like Ordinals. Schillinger predicts that Bitcoin DeFi will surpass Ethereum DeFi within five years, citing Ordinals’ trading volumes exceeding those of Ethereum and Solana NFTs combined. With over $1 trillion in untapped Bitcoin capital, Bitcoin DeFi appears poised for substantial expansion.