Lombard Shifts LBTC Yield Source: Targets 2.5% Net Yield in Bitcoin

Lombard is targeting a 2.5% net annual yield in Bitcoin terms by shifting LBTC’s yield source from the Babylon Bitcoin staking model to a covered-call option strategy managed by Bitwise.

Lombard has announced the details of the new yield model to be implemented for LBTC. Moving away from the existing Bitcoin staking model, the company will direct funds into a covered-call option strategy managed by Bitwise. In this method, Bitcoin will be utilized to generate additional income through the writing of options representing the right to buy at a specific price.

The new strategy will cover a maximum of 60% of the assets backing LBTC. The targeted yield rate was announced as a net 2.5% APY per year in Bitcoin. Custody services for the Bitcoin used within the strategy will be provided by Anchorage Digital Bank and Kraken Institutional.

New yield plan for LBTC begins

Lombard will initially test the implementation with a $10 million pilot program. While the pilot program is scheduled to begin the week of August 17, the target date for the full deployment of the strategy has been announced as September. In this way, the company plans to scale the new system gradually.

Lombard stated that existing LBTC holders do not need to take any action for this transition. While users are not expected to move their assets or submit a new application, the source of the yield will transition from the Babylon Bitcoin staking model to the Bitwise-managed option strategy. With this change, LBTC’s yield structure will be based on the option income generated by the strategy rather than directly on Bitcoin price movements.