First asset acquisition in the crypto industry

On October 30th, an asset acquisition sent ripples through the crypto community. Lombard acquired BTC.b—a Bitcoin-wrapped asset with a circulating supply of approximately $550 million—from Ava Labs. On the surface, this appears to be just another business collaboration, but closer inspection reveals that this may be the first truly significant "asset acquisition" in the crypto industry, rather than the more common code forks, team mergers, or brand alliances. What's interesting is that BTC.b is not a concept, not a white paper, and not an experiment still on a testnet. It's a living product with 12,000 real users, integrated into mainstream protocols like Aave, BenQI, and GMX, with real money flowing through it daily.

Ava Labs sold the entire package, including users, integration relationships, and technical architecture—the complete package. This is almost unprecedented in the crypto world. Even more intriguing is the timing. Bitcoin had just hit a new all-time high, institutional funds were pouring into the crypto market, and regulators were beginning to frown upon centralized, packaged assets. WBTC was questioned about custody risks, and cbBTC was criticized for its KYC hurdles; the market needed a new narrative. Lombard's move at this juncture is no coincidence. But we need to calmly ask: Is this truly a signal of industry evolution, or just another carefully crafted marketing narrative? Can the logic behind this deal withstand market scrutiny? More importantly, what structural changes does it reveal occurring within the Bitcoin DeFi ecosystem?

Behind the Deals: Is the Crypto Industry Finally Starting to "Buy Companies"?

In the traditional financial world, asset acquisition is a perfectly normal business practice. But in the crypto space, the dominant theme for the past decade or so has been "copy and paste": See a good project? Fork it. Want to compete? Issue a new coin. Need to expand? Build another chain. Actually spending money to buy an operational asset? Almost no one does that. Why? Because the underlying logic of the crypto world has always been "code is law" and "open source is paramount." Since everything is open source, why spend money to buy it? Just fork it, give it a new name, change the logo, and find a few KOLs to promote it, isn't that enough? This is also why we see countless "XX swaps" and "YY finances," which are essentially variations of Uniswap or Compound.

But this time it's different. Lombard didn't copy a Bitcoin protocol; instead, they bought the existing one. This reflects a shift in industry perception: user relationships, protocol integration, and brand trust are starting to have value. You can copy the code, but you can't copy Aave's willingness to accept your collateral, the daily usage habits of 12,000 users, or the security record accumulated over two years. From this perspective, Ava Labs' choice is also interesting. As the core team of the Avalanche ecosystem, they could have continued operating BTC.b, slowly making money through transaction fees and ecosystem growth. But they chose to divest. What does this mean? Either they judged BTC.b's growth potential to be limited, and cashing out was more profitable; or they wanted to concentrate resources on more core tasks, outsourcing the "dirty work" of asset packaging.

Either way, it reflects a reality: even leading projects are beginning to acknowledge that specialization is key, and they don't need to do everything themselves. If this deal goes through, it could open up a new market: the M&A market for crypto assets. Projects with users and integrations but limited team resources may become acquisition targets. Large platforms with capital and ambition may expand rapidly through acquisitions. This sounds a lot like the story of the internet age—Google bought YouTube, Facebook bought Instagram—only now it's about tokens and smart contracts. But there's a huge uncertainty: will the community buy it? Crypto users believe in decentralization and dislike large-company-style mergers and acquisitions. If Lombard messes up BTC.b after taking over, or if users feel it's a "betrayal," the entire narrative could collapse immediately.

The troubles of WBTC, the opportunity for decentralized asset wrapping.

To understand the significance of this transaction, we must first understand Bitcoin's awkward position in the DeFi world. Bitcoin is the totem of the crypto world, with a market capitalization exceeding $1.3 trillion, yet its presence in DeFi is extremely low. The reason is simple: Bitcoin is not a smart contract platform; you can't directly use native BTC for DeFi on Ethereum or Solana. This is why the business of "wrapping Bitcoin" exists—locking real BTC somewhere and then issuing an equivalent amount of tokens on other chains to represent it. For the past few years, this market has been largely monopolized by WBTC. With a circulating supply of over $8 billion, it holds absolute dominance. But WBTC has a fatal flaw: it's too centralized. All Bitcoin is held in custody by BitGo; you have to trust that BitGo won't run away, won't be hacked, and won't be frozen by regulatory agencies.

For an industry that claims to be decentralized, this trust model is a huge irony. This year's situation has exacerbated the problem. Regulators have begun targeting stablecoins and packaged assets, demanding transparency, compliance, and KYC. WBTC was forced to make some changes, which in turn sparked discontent within the community. Meanwhile, Coinbase launched cbBTC, attempting to carve out a share of the market using its brand and compliance advantages. But cbBTC has a problem: it requires KYC, which runs counter to the spirit of crypto. Many users and protocols do not want to be tied to the ecosystem of a centralized exchange. The market needs a third option: one that is both decentralized and compliant; secure and without a single point of failure. This is the paradigm shift taking place in the Bitcoin packaging sector.

The problem with BTC.b before was that it was merely a product within the Avalanche ecosystem, lacking the resources and motivation for cross-chain expansion. Ava Labs' core business was building public chains, with asset packaging being a secondary focus. Now, with Lombard taking over, the situation is different. Lombard's entire business model is built around Bitcoin DeFi; it has the motivation to promote BTC.b, the resources to deploy across multiple chains, and the team to integrate with more protocols. But here's a crucial question: what makes Lombard capable of challenging WBTC? The liquidity network effect is extremely powerful. Users use WBTC because all protocols support it; protocols support WBTC because all users use it. This is a vicious cycle that's difficult for newcomers to break. Lombard's strategy is differentiation. It not only offers non-interest-bearing BTC.b but also interest-bearing LBTC, giving users more choices.

The question is, can this logic be validated in the market? Do users truly care about decentralization and product diversity, or do they simply care about which token has the best liquidity and lowest fees? The next 6-12 months will provide the answer. If Lombard can significantly increase the circulating supply and protocol integrations of BTC.b during this period, then this strategy is effective. However, if the data stagnates or even leads to user churn, then all the theoretical advantages are merely theoretical. More importantly, Lombard needs to prove that a verification network of 15 institutions is indeed more secure and transparent than a single custodian. If any technical mishap or crisis of trust occurs during this process, the entire narrative will collapse instantly.

The 1% Dilemma of Bitcoin DeFi

A figure that's been repeatedly cited is that of Bitcoin's $1.3 trillion market capitalization, less than 1% is active in DeFi. This sounds like a huge opportunity—if that percentage could be increased to 5%, that would be a $65 billion market; 10% would be $130 billion. Every Bitcoin DeFi project tells this story, and Lombard is no exception. But we need to ask: is this 1% a temporary phenomenon or a structural reality? Why are Bitcoin holders reluctant to put their coins into DeFi? The first reason is security. Bitcoin is "digital gold," and holders are looking for long-term storage, not short-term trading. Bridging Bitcoin to other chains inherently increases risk—smart contract vulnerabilities, cross-chain bridging attacks, and packaging protocol failures are all real-world incidents.

The crashes of FTX, Celsius, and Terra-Luna are still fresh in people's minds, making users extremely cautious about "putting their assets elsewhere." The second reason is the unattractive returns. In a bull market, Bitcoin's own gains are considerable, so why risk earning a few percentage points in DeFi yields? In a bear market, preserving capital is the top priority, and no one will take risks. DeFi yields are only attractive during a specific window—when Bitcoin prices are relatively stable but market sentiment remains optimistic. Such windows are rare. The third reason is the technical barrier. For ordinary users, understanding the concept of "wrapping Bitcoin" is already difficult enough, let alone operating on different chains, managing gas fees, and dealing with liquidity risks. Those truly active in DeFi are often technically savvy, experienced players with a high risk tolerance.

Therefore, the 1% figure might not be a bug, but rather a feature. It doesn't reflect a "huge untapped market," but rather that "most Bitcoin holders are simply not suited for DeFi." If this is the case, then all projects that market themselves as "unleashing Bitcoin's potential" may be deceiving themselves. However, there's another possibility: the market hasn't yet found the right product form. Perhaps in the future, a simpler, safer, and easier-to-use method will emerge, allowing ordinary Bitcoin holders to enjoy the benefits of DeFi without taking on excessive risks. If that day comes, 1% could indeed become 10% or more. The question is, who can create that product? This requires not only technological innovation but also user education, regulatory cooperation, and mature infrastructure. Lombard's acquisition of BTC.b is essentially securing its entry ticket into this arena.

Ava Labs' strategy: Keep what needs to be kept, sell what needs to be sold.

From Ava Labs' perspective, this transaction is quite intriguing. BTC.b is a crucial asset in the Avalanche ecosystem and a vital bridge connecting Bitcoin. Selling it might initially seem like weakening the ecosystem, but there could be a deeper logic behind it. First, managing custodial assets is cumbersome, requiring the maintenance of reserves, protocol integration, handling user support, passing audits, and monitoring regulatory changes. For teams focused on infrastructure development, the resource investment is not cost-effective, making it better to entrust it to a professional institution. Second, BTC.b's growth may have reached a bottleneck. Although its $550 million size is considerable, it is still insignificant compared to WBTC. Ava Labs' core competency lies in building the chain rather than promoting custodial assets, making further expansion difficult. Handing it over to Lombard could reignite growth, as Lombard will invest heavily in cross-chain expansion. Finally, this is also a wise risk transfer. Custodial assets face increasing regulatory risks. If policies tighten in the future, Lombard will be impacted, not Ava Labs. Conversely, if BTC.b succeeds under Lombard's operation, Avalanche will still benefit, as it remains the "core hub" of the ecosystem.

Conclusion: One experiment, one signal

It's too early to say whether this deal will ultimately succeed or fail. But it has certainly opened a window into the changes happening in the crypto industry: from chaotic growth to strategic consolidation, from code worship to user-centricity, from single-chain competition to multi-chain collaboration. Whether Lombard can carve out a path to success amidst the competition from WBTC and cbBTC depends on its execution, market judgment, and a bit of luck. Whether BTC.b can grow from a regional asset into a global infrastructure depends on whether it can truly solve user pain points, rather than simply providing a theoretically better solution.

More broadly, this case will serve as a model for the crypto industry. If successful, it will lead to more similar asset acquisitions, a maturing M&A market, and an industry moving closer to traditional business models. If it fails, it may reinforce the belief that "decentralization doesn't require corporatization," and the industry will remain chaotic yet vibrant. Regardless, this is a noteworthy experiment. It involves more than just a $550 million asset transfer; it's an exploration of the future form of the crypto industry. In the coming months, we will see the market provide the answers. The numbers—circulation, activity, integrations, market share—will reflect reality more honestly than any white paper or roadmap. As observers, all we need to do is remain attentive, remain skeptical, and wait for validation.