Crypto investors looking to put their Bitcoin to work just got a new option, thanks to a partnership between Bybit and Avalon Labs. The global exchange has integrated Avalon’s CeDeFi protocol into its Bybit Earn platform, giving users a new way to earn yield on Bitcoin without giving up control of their assets.
This integration makes use of Avalon’s fixed-rate institutional lending layer, where users can benefit from arbitrage opportunities and stable returns by tapping into high-yield DeFi strategies all while maintaining the security and simplicity of a centralized exchange.
So how does it all work?
At the core of this partnership is Avalon’s ability to connect centralized and decentralized finance in a way that’s intuitive and transparent. Their system uses a 1:1 Bitcoin-pegged token called FBTC, developed by DeFi protocol Mantle in collaboration with Bitcoin infrastructure firm Antalpha Prime. This tokenized version of Bitcoin is then bridged to Ethereum and other blockchain ecosystems, opening the door to more dynamic yield strategies.
Once on-chain, FBTC is used as collateral on Avalon’s platform to borrow stablecoins, specifically USDt, at a fixed 8% rate. These borrowed funds are then deployed into the Ethena Labs ecosystem a high-performance synthetic dollar platform that includes assets like USDe and its staked version, sUSDE. Avalon aggregates and manages these strategies behind the scenes and routes the resulting returns directly back to Bybit Earn users.
For everyday users, the result is a seamless experience: deposit Bitcoin, earn stable yield, and withdraw when ready all without the usual complexity of managing DeFi protocols yourself.
This model represents a growing trend in crypto called CeDeFi (centralized decentralized finance), where the accessibility and compliance of centralized platforms meet the yield-generating power of decentralized finance. It’s a particularly compelling model for institutional players and regulated environments, as it adds layers of structure and control without sacrificing innovation.
Avalon isn’t just an average DeFi protocol either. Back in March, the company announced that it had secured over $2 billion in credit capacity, giving it the firepower to support institutional-scale borrowing and liquidity services. This capital pool allows borrowers to access USDt liquidity without selling their Bitcoin a move that resonates with long-term holders and funds looking to optimize capital efficiency.
The team behind Avalon has also been exploring bigger ideas. In February, co-founder Venus Li revealed that the firm was evaluating the potential launch of a Bitcoin-backed debt-focused public fund. Their research suggests that by leveraging Regulation A exemptions in the U.S., they could pave a compliant path forward for crypto products designed for mainstream financial markets.
While the fund isn’t live yet, it signals Avalon’s ambition to bridge crypto with traditional capital markets in a meaningful way.
The partnership with Bybit is part of that broader mission. By offering a familiar interface and robust compliance standards, Bybit serves as an on-ramp for users who want exposure to DeFi yields without the technical barriers or risks of self-custody. Avalon handles the backend operations strategy allocation, risk management, and stablecoin deployments so users simply earn.
This collaboration also builds on momentum from other parts of the ecosystem. In February, Ethena Labs, the DeFi protocol powering the synthetic yield strategies, raised $100 million to accelerate development of its blockchain and launch new products aimed at institutional adoption. One such product is iUSDe, a regulated mirror of their synthetic dollar specifically built for finance firms and licensed entities.
Together, these integrations form a layered infrastructure that takes Bitcoin traditionally a non-yielding asset and makes it productive, without compromising on security or user experience.
In an environment where passive income from digital assets is increasingly in demand, partnerships like Bybit and Avalon’s are a clear sign of where the market is heading. As more CeDeFi bridges come online, expect to see a wave of new financial products that combine the best of both worlds high yield potential and institutional-grade trust.
For Bitcoin holders looking to earn without losing custody, and for institutions seeking structured yield in crypto, this is the kind of evolution that signals DeFi is maturing and it’s here to stay.
