Lombard taps Bitwise to boost LBTC yield with covered calls

Lombard is replacing LBTC’s Bitcoin staking-based yield with an institutional covered-call options strategy managed by Bitwise Investment Manager, targeting 2.5% net APY in BTC terms. The change is aimed at creating a higher and more scalable source of Bitcoin yield while keeping LBTC’s existing token structure and DeFi utility intact.

Since launching, LBTC has onboarded approximately $3 billion of Bitcoin, reached $1 billion in TVL in 92 days and achieved around 80% utilization across DeFi. Lombard says the asset’s original staking-based yield helped drive adoption, but Bitcoin staking has not matured into a sustainable yield market, making a new source of income necessary for the next phase of growth.

The new model uses covered calls, with institutional counterparties paying premiums for Bitcoin options. Those premiums are intended to increase LBTC’s backing value and deliver a targeted 2.5% net annual yield. The strategy is deliberately conservative, with leverage, borrowing and naked short positions prohibited and all options positions required to be fully covered by Bitcoin.

Lombard will allocate no more than 60% of LBTC’s backing to the active Bitwise strategy, while the remaining allocation stays in its existing passive custody structure. Bitcoin used for the active strategy will be held with qualified custodians under arrangements designed to prevent rehypothecation, while Bitwise will have trading authority but cannot withdraw or transfer the underlying Bitcoin.

The strategy draws on a 4.5-year operating history, during which Gordon Grant managed a covered-call mandate that Lombard says produced positive historical returns in every calendar year. Grant subsequently brought the strategy to Bitwise clients after joining the firm in 2025.

The transition will not require LBTC holders or DeFi protocols to make changes. Lombard’s token contract, mint and redemption mechanisms, RedStone price feed, Chainlink CCIP bridge and Proof-of-Reserve attestations remain unchanged, as do integrations with more than 50 protocols. Deployment will begin with a $10 million pilot before scaling toward 50%–60% of TVL in September, meaning yield will initially remain below the 2.5% target. The target is variable and not guaranteed, and losses are possible.