LBTC Moves to Institutional Yield: Targeting 2.5% Net APY, Strategy Managed by Bitwise

Starting the week of 17 August, LBTC's yield source moves to an institutional covered-call options strategy managed by Bitwise Investment Manager, LLC, targeting 2.5% net APY in Bitcoin terms.

Lombard was built to connect two of the most important financial innovations of our time: Bitcoin and onchain finance. We're on a mission to bring $1 trillion in Bitcoin onchain, making Bitcoin one of the most productive assets in DeFi.

When Lombard launched, 0.1% of Bitcoin supply was active onchain. Bitcoin sat at the margins of the onchain economy, dwarfed by other assets and an afterthought for most protocols and builders. LBTC marked a turning point. Yield gave Bitcoin holders a material incentive to come onchain, and $Billions in Bitcoin followed.

The Lombard Protocol is not intended for, or available to, U.S. persons, U.K. persons and persons in other restricted jurisdictions. Full disclosures below.

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In 22 months, LBTC proved demand for Bitcoin in DeFi:

• $3 billion in net-new Bitcoin onboarded, making LBTC the most successful onchain Bitcoin yield product to date.
• 80% utilization across DeFi protocols, one of the highest deployment rates of any asset.
• $1 billion in TVL within 92 days of launch, the fastest growth trajectory of any yield-bearing asset.
• The only yield-bearing Bitcoin approved by major lending markets, including Aave, Morpho, Spark, and Maple.
• Direct integrations with leading platforms, including Ledger, Binance, and Bybit.

LBTC proved that Bitcoin holders want a yield-bearing, composable asset, not only to hold, but to deploy as collateral, borrow against, and generate additional yield. This demand was evident even when LBTC's yield was merely 0.4% APY.

In spite of this success, LBTC's adoption has undoubtedly been hindered by the underlying yield source. While promising at one point, Bitcoin staking as a market has failed to develop, and staking yield as a result is unsustainable and likely to decline further. The promise of yield propelled LBTC to become one of the most successful DeFi assets ever, but with yield near zero, the primary mechanism for driving net-new Bitcoin onchain is gone.

The past 6 months was spent exploring the universe of Bitcoin yield to plan out the next version of LBTC, one built upon a sustainable, scalable yield source with a meaningfully higher yield. Today, the solution is unveiled.

The first iteration of LBTC established the market. The second is built for scale.

Starting the week of 17 August, LBTC's yield source is moving to an institutional covered-call options strategy managed by Bitwise Investment Manager, LLC. Through this, LBTC becomes the first Bitcoin asset to combine institutional offchain yield with full composability across onchain finance. The asset will target 2.5% net APY in Bitcoin terms.

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The yield mechanism is straightforward: covered-call options are sold on Bitcoin, counterparties pay real premiums for optionality on Bitcoin's price, and those premiums accrue to LBTC holders at a targeted 2.5% net APY, through the appreciation of LBTC's backing value.

Your LBTC is designed to appreciate in Bitcoin terms even as you use it across DeFi. At a targeted 2.5% net APY (variable and not guaranteed), the asset becomes qualitatively different for DeFi users. Using LBTC as collateral offsets a meaningful portion of borrowing costs while the underlying position compounds. Deploying LBTC into vaults like Lombard's Bitcoin Earn lets holders stack additional yield on top. Of course, as with most things, losses are possible.

This strategy is adopted for three reasons:

1. Covered calls are the established institutional approach to Bitcoin yield. Large asset managers, family offices, and HNWIs have used covered-call strategies to generate income on Bitcoin positions for years. LBTC brings exposure to that strategy onchain, open to almost everyone.

2. The strategy's track record is best in class. Four and a half years of legacy operating history, with positive historical returns in every calendar year. More on this below.

3. This is one of the most scalable approaches to Bitcoin yield. Premiums for selling call options have existed throughout the history of equity, commodity and bitcoin markets. The strategy is not capacity-constrained by a protocol emission schedule or governance decision, it grows as Bitcoin markets grow.

"The end-state for the world's hardest money is superfluid collateral, not stashed away in cold storage. Lombard was built on the conviction that Bitcoin will become one of the dominant collateral assets in DeFi, and LBTC is the clearest expression of that conviction yet: an onchain asset with real income, denominated in Bitcoin, with a strategy managed by Bitwise. This is how Bitcoin gets to a trillion dollars onchain." Jacob Phillips, CEO and Co-Founder, Lombard Labs.

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The strategy: 4.5-year legacy strategy track record.

From 2022 to December 31, 2025, derivatives trader Gordon Grant ran a covered call strategy for an individual separately managed account, whose performance is outlined below. The strategy's performance was positive every quarter (with one negative month on a net performance basis).

Beginning in 2026, Grant, who joined Bitwise as Head of Derivatives in September 2025, initiated this strategy for Bitwise clients.

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"This announcement is a breakthrough for Bitcoin holders, be it a family office, exchange, or onchain entity. For years, Bitwise has been managing options strategies for very large Bitcoin holders to provide yield while keeping their bitcoin in their qualified custodial accounts. We're delighted to now bring that longstanding strategy to Lombard to support their mission of making the world's largest crypto asset more productive." Hunter Horsley, CEO, Bitwise.

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The structure: conservative by design

The strategy LBTC draws on is a deliberately conservative implementation. The mandate disallows leverage, borrowing, and naked short positions. Every position must be fully covered by Bitcoin held in custody. Positions operate under defined limits on delta, vega, gamma, and single-strike concentration, with additional restrictions on option tenor.

Only a portion of the total assets backing LBTC is deployed to the active strategy. The active allocation, the portion of LBTC backing deployed into the covered-call mandate, is capped at a maximum of 60%* of LBTC's total backing. The remaining 40–50%* stays in the passive allocation under Lombard's existing decentralized Security Consortium custody, isolated from the strategy to preserve Bitcoin redemption capacity. The 2.5% target net APY is a weighted average of the active allocation and the passive allocation.

At the transparency page, you will have a clear picture of how Bitwise is managing Lombard's SMA. We are providing you insight into past performance, greeks exposure, deployment, tenor, BTC spot correlation, and respective target and breach bands.

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The security structure protecting every LBTC

In two years of operations, across LBTC, BTC.b, and vault infrastructure, Lombard has not had a single security incident. That standard does not change with this transition.

For the active allocation, bitcoin is held by Lombard Finance entities with qualified custodians. Native bitcoin sits in segregated custody accounts at Anchorage Digital Bank, N.A. and Kraken Institutional. This custody is structured under market-standard tri-party agreements designed to be bankruptcy-remote and offer no rehypothecation rights to trading counterparties.

Bitwise holds trading authority only and cannot withdraw, transfer, or rehypothecate. Options are traded over-the-counter at desks including FalconX, Kraken Institutional, and Anchorage Digital, and settles them financially, with no direct posting of collateral required by Lombard.

The Lombard Security Consortium continues to secure the passive allocation, exactly as it operates today.

Combined, the two custody structures protect LBTC's backing through a qualified custodian under legally-binding tri-party agreements (active allocation), and a distributed multi-institution consortium (passive allocation).

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Daily proof of everything: deployment, yield, custody, and risk metrics, live now.

Alongside this transition, Lombard has launched one of the most detailed transparency dashboards for an onchain asset. It will show daily and historical risk metrics cryptographically signed, comprehensive yield data, full Proof of Reserve, and a detailed custody and deployment breakdown. The transparency page is updated daily.

Explore the transparency dashboard →

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The transition: the yield machine changes, the asset doesn't.

LBTC's token contract, mint and redeem logic, LBTC's price feed via RedStone, cross-chain bridge with Chainlink CCIP and Proof-of-Reserve attestations are all unchanged. Existing protocol integrations across Aave, Morpho, Spark, and 50+ other protocols require no modification on any chain.

If you're holding LBTC today, you don't need to do anything. Every structural decision in this transition, the liquidity buffer, the tri-party agreement, the conservative allocation cap, was built to protect what you already hold while enhancing its yield potential.

For the next 14 days, all redemptions will be honored with no exposure to the underlying strategy.

Deployment runs in tranches: a small $10 million pilot in the week of 17 August to validate custody, oracle feeds, and dashboard integrity, then gradual increases across following weeks, with the full active allocation (50–60% of TVL) in September. Variable yield builds as the active allocation scales. In the early weeks of transition, LBTC's yield will be below the 2.5% target as deployment progresses. The transparency page shows current yield and deployment progress side by side.

For launch, Lombard will announce incentive programs to support the next iteration of LBTC, including an Insurance Fund (first-loss protection) and LBTC DeFi incentives.

For DeFi users, the arithmetic improves immediately. A position in LBTC on Morpho generates approximately $12,500 per year in Bitcoin terms on a $500,000 position from the covered-call strategy alone (illustrative, based on 2.5% target; variable and not guaranteed, with losses possible), automatically offsetting a meaningful portion of borrowing costs while the underlying position compounds. For holders accessing LBTC through Bitcoin Earn products on Ledger, Binance, and Bybit, strategy yield can stack with platform yield, targeting an aggregate of approximately 5–10% in Bitcoin terms on the original position, without leverage (illustrative; variable and not guaranteed, with losses possible).

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Bitcoin's next trillion starts today

The first iteration of LBTC established the market. The second is built for scale.

Less than 0.4% of all Bitcoin is active onchain today. That's our starting point. Every element of this product builds a Bitcoin primitive that can onboard billions in net-new Bitcoin and meet the institutional standard required to do it.

Through the Lombard SDK, any chain, protocol, or platform can integrate LBTC and give their users instant access to yield-bearing Bitcoin, no infrastructure build required. Through Bitcoin Earn integrations with Ledger, Binance, and Bybit, any Bitcoin holder anywhere can access this without opening a DeFi interface. Every integration brings more Bitcoin onchain, more yield opportunities flowing to holders, more value to every protocol it touches.

We opened by saying Lombard's mission is to bring $1 trillion in Bitcoin onchain. This transition is how it gets there: not a new experiment, but the institutional infrastructure that makes yield-bearing Bitcoin a new standard for onchain Bitcoin.

The opportunity cost of holding idle Bitcoin just changed. Bitcoin that earns more Bitcoin.

Explore the transparency dashboard →

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Availability

The Lombard Protocol is not intended for, or available to, U.S. persons, U.K. persons and persons located in certain other jurisdictions (together, "Prohibited Persons").

Legal Disclaimer

LBTC is a digital asset issued by LF Operations Inc., a Panama corporation (the "Issuer"). LBTC is not a bank deposit, money market fund, or other regulated deposit or investment product, is not insured or guaranteed by any government, deposit insurer, or other person, and is not covered by any investor or depositor protection scheme. Yield is variable, not guaranteed, and past, targeted, or indicative figures are not a reliable indicator of future yield. Digital assets involve a high degree of risk. Direct minting and redemption are not offered to Prohibited Persons. Nothing on this page is investment, legal, accounting, or tax advice, or a recommendation, offer, or solicitation. No fiduciary, advisory, or agency relationship is created between you and the Issuer or any of their respective affiliates. Your acquisition, holding, and use of LBTC are governed solely by the Lombard Terms of Use and LBTC Product Terms are subject to the risks described in the Risk Disclosures, which you are required to read and accept before using the Lombard Protocol.

The 2.5% net APY figure is a target only and is not a guarantee, projection, or promise of future performance. Actual yield will depend on market conditions, Bitcoin implied volatility, option premium levels, fees and expenses, and the pace and extent of the deployment ramp, and may be materially lower than the target or zero. Illustrative figures (e.g., $12,500 per year on a $500,000 position; aggregate 5–10% stacked yield) are based on target yields and are for illustration purposes only.

The Lombard Protocol, LBTC, the transparency dashboard, and all information on this page are provided "as is" and "as available," without representation or warranty of any kind, whether express, implied, or statutory. The Lombard Protocol is not intended for, and is not available to, Prohibited Persons, and no communication on this page is directed to any Prohibited Person. Access may be restricted by technical means, and by accessing or using the Lombard Protocol you represent that you are not a Prohibited Person and are not acting for the account or benefit of a Prohibited Person.

PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. HYPOTHETICAL AND ILLUSTRATIVE PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT OR HOLDER WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. THE HISTORICAL RESULTS SHOWN ARE THOSE OF MANDATES OTHER THAN LBTC AND DO NOT REPRESENT THE PERFORMANCE OF LBTC.

About Lombard

Lombard is a leading Bitcoin finance protocol with $3 billion in Bitcoin onboarded. Founded in 2024 and backed by Polychain Capital, Franklin Templeton, and Binance Labs, Lombard's products, LBTC, BTC.b, the Lombard SDK, Bitcoin Smart Accounts, and Bitcoin Earn, enable Bitcoin holders, corporate treasuries, and financial institutions to earn yield on, borrow against, and deploy their Bitcoin onchain. Lombard's infrastructure powers Bitcoin products for the users of Ledger, Binance, and Bybit, and integrates with Aave, Morpho, and 50+ DeFi protocols across 10 blockchains. Visit lombard.finance.

About Bitwise

Bitwise Investment Manager, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission and is registered with the Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor. Bitwise Investment Manager, LLC is a wholly owned subsidiary of Bitwise Asset Management, Inc. ("Bitwise"), a global crypto asset manager with more than $9 billion in client assets. Since 2017, Bitwise has established a track record of excellence helping investors understand and access the opportunities in crypto. Bitwise manages a suite of over 70 investment products in the U.S. and Europe, spanning ETPs, index funds, alpha and SMA strategies, and staking solutions. The Bitwise team of over 175 technology and investment professionals is backed by leading institutional investors and has offices in San Francisco, New York, and London.

Disclosures

Bitwise Investment Manager, LLC ("Bitwise"), a CFTC-registered commodity trading advisor and NFA member, serves solely as commodity trading advisor to LF BVI Ltd. under a discretionary managed account agreement covering a designated bitcoin account. Bitwise does not custody, hold, or control any assets and cannot withdraw, transfer, or pledge them, except to settle trades. Bitwise provides no services or advice to, and has no relationship with, LBTC, the Lombard protocol, the Lombard Finance Foundation, LF Operations Inc., or any LBTC holder. Nothing in these materials is an offer, solicitation, endorsement, or recommendation by Bitwise, and Bitwise has not prepared, adopted, or verified any statement in these materials other than any quotation expressly attributed to Bitwise.

Risk Factors. No target return or yield is guaranteed. Any target, illustrative figure, or "net APY" is an objective only, not a promise, and actual results will vary and may be negative. Options and derivatives are complex and can behave like leveraged instruments; losses can occur rapidly and be magnified by volatility, limited liquidity, and margin requirements. A covered-call strategy caps upside participation and carries assignment and "call-away" risk in some market conditions; any statement that no bitcoin has been called away reflects historical experience only and is not a prediction. The strategy does not protect against a decline in the price of bitcoin, and the underlying bitcoin can lose substantial value. Returns measured in bitcoin terms, relative to a passive-holding benchmark, do not protect against declines in bitcoin's value in dollar or other fiat terms. Volatility spikes can raise margin requirements and, if margin is not met, result in forced liquidation and realized losses. Custodians, exchanges, trading venues, and counterparties are selected and contracted solely by the client, not by Bitwise; their failure, insolvency, outage, or error can cause losses for which Bitwise is not responsible. Market disruptions, outages, halts, price dislocations, and other force-majeure events may prevent execution or position adjustment and may result in losses. Past performance, including any predecessor track record achieved before January 2026 and not achieved at Bitwise, is not indicative of future results; hypothetical or representative performance has inherent limitations. The legal and regulatory treatment of digital assets and digital-asset derivatives continues to evolve and could adversely affect the strategy. Nothing in these materials is investment, legal, or tax advice.