BounceBit Tests BTC Trading Strategy Using BlackRock’s BUIDL as Backing

BounceBit, a provider of cryptocurrency infrastructure, utilizes elements from centralized and decentralized finance in its operations. The firm has launched a bitcoin derivatives trading strategy that incorporates BlackRock’s tokenized money market fund, BUIDL, to increase profitability.

The trading approach is set to be made available to both institutional and retail investors. It primarily consists of two strategies: a bitcoin basis trade that entails taking a long position in the spot market while shorting futures, and a short position in BTC put options, all collateralized by BUIDL tokens.

The basis trade, commonly referred to as cash and carry arbitrage, has shown an impressive annualized yield of 4.7%. In addition, writing put options has yielded an extra 15%. When combined with the 4.25% yield from BUIDL tokens used for collateral, the overall yield surpasses 24%.

By employing BUIDL as collateral, BounceBit has achieved returns that notably outperform strategies backed by stablecoins, which generally do not yield any returns.

“This strategy allows investors to leverage both Treasury Bill yields and profits from funding rate arbitrage,” noted Jack Lu, the founder and CEO of BounceBit, in a recent announcement.

“BounceBit connects Western issuers of real-world assets with the crypto trading framework in Asia, thereby creating fresh avenues for yield generation,” added Lu.

BounceBit functions as a native BTC restaking chain that secures its network through the staking of both bitcoin and BounceBit tokens. This framework enables bitcoin holders to earn yields via native validator staking, as well as through a DeFi ecosystem combined with a mechanism resembling centralized finance, facilitated by Ceffu and Mainnet Digital. Presently, over $500 million worth of cryptocurrencies are secured on the BounceBit platform.

The company has plans to extend the BUIDL-collateralized strategy to both institutional and retail investors imminently. A spokesperson for BounceBit elaborated that, “The successful pilot serves as a proof of concept for our new product line, BB Prime, which will cater to both retail consumers and institutional clients.”

“This initiative forms the foundation of BB Prime, a novel type of CeDeFi application built atop real-world assets that have traditionally faced utility challenges beyond mere t-bill yield holding, which has impeded widespread adoption,” the spokesperson further explained.

BUIDL, introduced by Securitize and BlackRock in March 2024, operates as a tokenized investment fund across multiple blockchain platforms, such as Ethereum, Aptos, and Polygon. Currently, this token boasts a market capitalization of $2.88 billion and is secured by short-term U.S. government bonds, maintaining a stable peg at one dollar per token.