DeFi startup Avalon Labs has closed a $10 million Series A led by Framework Ventures to expand its bitcoin-backed stablecoin USDa, which has already attracted $700 million in total value locked.
Avalon Labs, the issuer of the bitcoin-backed stablecoin USDa, has raised $10 million in a Series A round led by Framework Ventures, with participation from UXTO Management, Presto Labs, and Kenetic Capital. The funding will be used to expand the platform's product suite and grow adoption of USDa, which has already attracted roughly $700 million in total value locked, making it the second-largest collateralised debt position protocol by TVL according to DeFiLlama.
How USDa Works
USDa is a dollar-pegged stablecoin backed by bitcoin collateral. Users deposit BTC into the protocol and can borrow USDa against it at a fixed interest rate of 8 per cent. The model is similar in concept to MakerDAO's DAI, where users lock up volatile crypto assets to mint a stable dollar-denominated token, but Avalon has built its system specifically around bitcoin rather than Ethereum-native collateral.
The appeal of the model is straightforward: bitcoin holders who want access to dollar liquidity without selling their BTC can use Avalon to borrow against their holdings. It is a proposition that resonates strongly in a market where bitcoin has surged past $100,000 and many holders are sitting on substantial unrealised gains but are reluctant to trigger taxable events by selling.
Beyond the Stablecoin
Avalon's ambitions extend beyond USDa. The platform also offers bitcoin-backed lending, yield-generating savings accounts, and a consumer credit card, positioning itself as a full-service DeFi banking layer for bitcoin holders. The vision is to evolve BTC from a passive store of value into an active financial instrument that can serve a range of everyday and institutional use cases.
Framework Ventures, which led the round, has a track record of early bets on DeFi infrastructure that later became category leaders. The firm's involvement lends credibility to Avalon's thesis that bitcoin-native DeFi is an underserved market with significant room to grow, particularly as institutional adoption of bitcoin accelerates.
The Bigger Picture for Bitcoin DeFi
Bitcoin's DeFi ecosystem has historically lagged far behind Ethereum's, largely because Bitcoin's scripting language is less flexible and the culture around BTC has traditionally favoured holding over on-chain experimentation. But that is beginning to change. The emergence of protocols like Ordinals and BRC-20 tokens in 2023 demonstrated appetite for building on Bitcoin, and projects like Avalon are now channelling that energy into financial products with clearer utility.
$700 million in TVL is a strong starting position, but Avalon will need to sustain that growth against competition from both Ethereum-based lending protocols that accept wrapped BTC and a growing roster of Bitcoin-native DeFi projects. The $10 million in fresh capital should provide runway to iterate on the product, but the real test will be whether bitcoin holders, a famously conservative cohort, are willing to put meaningful amounts of BTC into a relatively young protocol. The fixed 8 per cent borrowing rate is competitive, and the market timing could hardly be better.
