How Yield Arbitrage Works in DeFi

There's a straightforward play happening between lending protocols and perp DEXs. The mechanics are simple: deposit BTC-backed tokens—whether WBTC, tBTC, LBTC, or SolvBTC—as collateral on lending platforms. Next, tap into cheap USDC borrowing at rates around 1% APR, a subsidy that makes the math work. The spread between these dirt-cheap borrow costs and what you pull from perp DEX yields creates the arbitrage window.

The three-step flow is clean. Collateralize your BTC derivatives. Lock in borrowing at subsidized rates. Capture the yield spread. It's the kind of strategy that rewards traders who spot where market inefficiencies still exist—when borrow rates get artificially low and organic yields haven't adjusted yet.