Crypto exchange Bybit has formed a partnership with the lending protocol Avalon to provide Bitcoin yield opportunities for its users.
As per an announcement from Avalon Labs on April 14 via X, the centralized decentralized finance (CeDeFi) protocol will now be integrated into Bybit’s yield product, Bybit Earn. Avalon stated that this integration will enable users of the platform to earn yield on Bitcoin (BTC) by utilizing its fixed-rate institutional borrowing layer.
Source: Avalon Labs
In March, Avalon Labs announced it had secured at least $2 billion in credit, with potential for scaling as necessary. This product allows institutional borrowers to access USDt (USDT) liquidity while retaining their Bitcoin holdings, with a fixed borrowing cost of 8%.
Additionally, in February, Avalon Labs revealed its consideration of issuing a Bitcoin-backed debt-focused public fund. Co-founder Venus Li mentioned that this fund could be established by leveraging a Regulation A exception in U.S. securities law:
“We have spent years researching how Regulation A has been applied in traditional finance and whether it could be a viable path for crypto companies. Although there are limited successful precedents within the crypto industry, our analysis of previous SEC-approved cases points to a feasible way forward.”
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Centralized and decentralized finance unite
The product from Avalon Labs operates as a CeDeFi protocol, bridging the gap between decentralized finance (DeFi) and centralized finance (CeFi). This product category provides enhanced control over capital flows and access, often offering benefits for meeting regulatory requirements when integrating with CeFi platforms.
The Bybit Earn integration utilizes Avalon Labs’ 1:1 Bitcoin-pegged token FBTC, developed in collaboration with DeFi protocol Mantle and Bitcoin-focused crypto developer Antalpha Prime. These tokens are subsequently bridged onto Ethereum and other blockchains.
Related: Ethena Labs, Securitize launch blockchain for DeFi and tokenized assets
A multi-protocol system
Avalon Labs’ platform accepts FBTC as collateral and provides loans at fixed rates. The borrowed USDt stablecoin is then employed in high-yield strategies via the Ethena Labs synthetic dollar protocol. The assets utilized in these strategies include Ethena USD (USDe) and Ethena Staked USD (sUSDE). According to the announcement:
“Returns are stable, secure, and passed back to Bybit Earn users—transforming Bitcoin into a productive asset while ensuring simplicity and risk management.”
In essence, Avalon Labs acts as a connection between Bybit and the yield-generating potential of Ethena Labs’ protocol, which it describes as a “CeFi to DeFi” bridge.
This news comes after Ethena successfully raised $100 million in late February for a new blockchain deployment and a token aimed at traditional finance. Furthermore, in January, Ethena announced plans to introduce iUSDe, a product mirroring USDe but intended for regulated financial institutions.
Bybit did not respond to inquiries from Cointelegraph by the time of publication.
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