From Bitcoin ETFs to Avalanche’s BTC.B: An Introduction to BTC.B-USDC Vaults
Struct Finance is set to unveil a new BTC-USDC Interest Rate Product, offering substantial yields on Bitcoin investments.
This has been made possible by effectively leveraging Avalanche’s BTC.B (Bridged Bitcoin) for DeFi applications.
The article covers important topics like the role of Bitcoin ETFs in the current market surge, Avalanche’s introduction of BTC.B for bridging Bitcoin to DeFi, and the unique delta-hedging strategy employed in our new vaults.
Bitcoin: The North Star of the Crypto Universe
Bitcoin isn’t merely a cryptocurrency.
It’s the heart of the crypto industry — a pivotal metric that investors monitor closely to assess market conditions.
Bitcoin’s trend shifts serve as a compass, guiding investment decisions across the crypto landscape. For instance, many use the Bitcoin halving as a metric for the future performance of the cryptocurrency sector.
We currently find ourselves in an intriguing scenario: Bitcoin is beginning to flex its muscles after weathering a drawn-out bear market.
In a promising turn of events, Bitcoin has once again ascended past the $30k mark, kindling optimism for a possible trend reversal.
Historically, Bitcoin has often been the trailblazer in recovery after a bear market, igniting the spark for an industry-wide upswing.
The chart below vividly illustrates this pattern, depicting periods of ‘Bitcoin season’ and ‘Altcoin season.’
Currently, we’re firmly in ‘Bitcoin Season’ territory.
At the time of writing, Bitcoin accounts for over 50% of the total crypto market cap.
The Advent of Bitcoin ETFs
The recent surge in Bitcoin’s price isn’t just an arbitrary event.
Many market observers have linked this surge to a singular, impactful development: the decision by three of the world’s most formidable asset managers, already invested in the crypto sphere, to expand their commitment by applying for Bitcoin ETFs
An Exchange Traded Fund (ETF), is a type of investment fund and exchange-traded product that involves a collection of securities — such as stocks — that often tracks an underlying index.
The purpose of an ETF is to allow access to Bitcoin for retail and institutional investors that are not comfortable owning cryptocurrencies.
ETFs are synthetic products, meaning they simulate the behavior of an asset class without requiring investors to own the asset directly.
Just last week, the SEC (Securities and Exchange Commission) gave the green light to a 2X leveraged Bitcoin ETF, sparking an enthusiastic wave of speculation and anticipation for approval of a spot Bitcoin ETF.
Notably, the joint foray into the crypto domain by three of the world’s largest asset managers — boasting a combined AUM (Assets Under Management) of a staggering $16 trillion — has sent ripples across the financial world.
One of the most buzzworthy applications comes from BlackRock, an asset management titan with a proven track record in the finance industry.
Their ETF filing is not just a mere submission; it is a signal to the world that the traditional financial realm is ready to embrace Bitcoin on a new level.
BTC.B on Avalanche: Bridging Bitcoin to DeFi
While Bitcoin continues to dominate the market, its inherent lack of a DeFi layer has traditionally made native yield generation quite challenging.
This is where Avalanche enters the picture, unlocking new possibilities with BTC.B (Bridged Bitcoin).
Avalanche has welcomed Bitcoin into its fold using the Avalanche Bridge, first announced in June 2022. This groundbreaking initiative has gradually phased out the use of Wrapped Bitcoin (WBTC), which was the previous method to bridge Bitcoins.
BTC.B stands for Bridged Bitcoin, and it represents BTC coins transferred to the Avalanche blockchain in the form of ERC-20 tokens.
With over 6000 BTC bridged and a fully diluted value of $180 million, BTC.B is carving a niche for itself in the crypto arena.
But why has Avalanche chosen BTC.B over WBTC?
The main reason for this is decentralization: WBTC was relying on centralized bridges and introducing trust assumptions to Bitcoin. As pointed out by Trader Joe on Twitter: “Only selected parties could bridge Bitcoin to Ethereum networks, with little transparency”.
In stark contrast, BTC.B is minted via Avalanche Core — a decentralized bridge — and can be trustlessly bridged across networks using the Layer Zero bridge.
The purpose of BTC.B is to empower BTC holders to explore DeFi opportunities on the Avalanche blockchain, without the need to acquire secondary tokens or rely on centralized bridges.
Moreover, BTC.B infuses BTC transactions with unprecedented speed by providing a DeFi-friendly wrapper that slashes block times and confirmations, thereby enabling its use as collateral in yield-bearing vaults.
Key Advantages of BTC.B:
- Enhanced composability and speed
- Decentralization without compromise
- Compatibility across multiple chains
- No need for wrapping or unwrapping
- Lower costs and simplified integration
So, what does this mean for Struct Finance?
Avalanche’s BTC.B has provided us with a powerful tool to create a new Vault that beautifully complements our Genesis USDC Vaults, heralding an exciting era in DeFi yield opportunities.
We have decided to build our vault on top of BTC to provide higher yields compared to our USDC vault, while still leveraging a secure asset and minimizing volatility and exposure to other risks.
Revolutionizing Bitcoin Yield: The Introduction of BTC.B-USDC Vaults
On our ongoing journey to reshape the landscape of crypto investing, we’re happy to announce the next product on our horizon — the BTC-USDC Interest Rate Product. This unique offering stands to disrupt the market with its unprecedented high fixed yield on Bitcoin investments.
At present, Bitcoin investments in prominent lending pools yield between 0.2–0.5%. Even the stable swap pools offering wBTC-BTC.b products only manage to deliver returns of about 2%.
Our BTC-USDC product shatters these limitations, offering significantly higher yields that are sure to draw the attention of investors.
Backtesting the strategy over a year, we’ve found that the fixed tranche has consistently maintained its robustness, never once being drained. This, along with a 10% fixed rate assumption, reassures investors of a stable return, redefining what they can expect from their Bitcoin investments.
The Art of Delta Hedging in Crypto: Embracing the Variable Side
As part of our BTC.B-USDC Vaults, we’re implementing a unique approach to managing investment risk: delta hedging.
While our fixed tranche takes center stage with its high yield, the variable side of our product offers an additional layer of intriguing complexity and potential.
Upon deployment of funds into the vault, the BTC.B in the fixed tranche gets converted into GLP, setting up a position that’s short Bitcoin against GLP and contributing a negative delta.
In contrast, the USDC on the variable side is converted into GLP, which inherently carries a positive delta.
This innovative delta-hedged product design achieves a fine balance between the positive and negative delta forces.
The result?
A robust strategy that allows investors to confidently navigate the crypto market’s inherent volatility.
This artful interplay of the fixed and variable sides within our vaults opens the doors for investors to tap into the potential of Bitcoin investments like never before. Welcome to a new era of Bitcoin investing, where delta hedging meets high yield to create a promising opportunity for substantial returns.
The Countdown Begins: Ushering a New Crypto Paradigm
As we draw closer to the launch of Struct Finance’s BTC.B-USDC vaults, we’re reminded of our unwavering commitment to providing unparalleled crypto investment opportunities. By catering to a diverse range of risk appetites, we ensure that both retail and institutional investors can tailor their strategies to maximize their returns, regardless of market conditions.
During these exciting times, we’ll be closely monitoring the performance of our new Vaults to better understand and meet the evolving needs of the Struct Finance community.
Together, we’re charting a course toward a promising new era in the world of crypto. The countdown to the launch begins now — are you ready to join us on this journey?
If you’re excited as we are and want to be part of this revolution, we encourage you to explore more about our new Vaults on our website or join our community discussion on our official social media channels:
Website: https://struct.fi/
dApp: https://app.struct.fi/
Twitter: https://twitter.com/StructFinance
Discord: https://discord.gg/MHMacHCFZp
Telegram Announcements: https://t.me/struct_finance_announcements
We look forward to welcoming you into the fold and setting a new paradigm in the crypto universe together.
