Recently, I’ve seen more and more discussions in the community about using protocols like Lista for yield spread arbitrage. I’ve also spent some time researching and decided to organize my thoughts.

Simply put, this logic is essentially "borrowing cheap money to earn expensive returns." In traditional interbank lending, this is how it’s done. Moving it on-chain turns into: using Bitcoin as collateral to borrow stablecoins, then investing those stablecoins into high-yield financial products. It’s like turning idle assets into a continuous cash flow generator.

**Most Attractive Part**

You don’t need to sell your valued assets to realize liquidity. For example, if you’re bullish on Bitcoin long-term but want some cash flow to participate in other opportunities—this method allows you to do both. Holding BTC while generating stablecoins through collateralization to earn interest is like creating a "side hustle" for your existing assets. It sounds quite appealing.

**But there are several pitfalls to consider in advance**

First, the interest spread is inherently unstable. Lista’s borrowing rates fluctuate, and the yields from financial products also vary. Today, you might still earn a 15% spread, but next month it could shrink to 5%. This isn’t like fixed-term bank deposits; it’s a dynamic game that requires ongoing attention. When the market is good, the appeal is high, but once the spread narrows, the attractiveness drops significantly.

Second, black swan risks cannot be ignored. If Bitcoin drops 20% within 24 hours, your collateral position could instantly trigger liquidation. The system will automatically execute liquidation to repay the debt, and at that point, the gains you aimed for might be completely wiped out, or even result in a loss. Therefore, you must set your collateralization ratio carefully—not too aggressive—to leave enough safety margin. This way, you have time and space to react in extreme market conditions.

Third, the use cases are limited. This strategy is most suitable for those who have already decided to hold their assets long-term. If you’re confident in a bull market and want to hold Bitcoin or Ethereum without selling, while earning some extra yield through this channel, it’s quite cost-effective. But if you’re a short-term trader looking to cash out once you’ve made enough profit, there’s no need to bother with this; just buy low and sell high directly.

**Complex Combination Strategies**

Some protocols now support using assets that already generate yield (like staked ETH or interest-bearing tokens) as collateral. This becomes a "two birds with one stone" approach—your collateral is earning yield while you arbitrage the spread. The accumulated returns can be substantial. However, this adds complexity and requires a thorough understanding of each component involved.

**Practical Operation Suggestions**

This isn’t a game for reckless moves. The smartest approach is to start with a small portion of your position to experiment, fully familiarize yourself with the entire process, understand all risks, and gradually figure out your risk tolerance. This way, you can verify whether this strategy truly suits you without risking too much due to operational mistakes.

From another perspective, the value of such strategies lies in making you realize that in a bear market, besides just holding assets passively, there are other ways to utilize them. When growth isn’t happening, extracting value from cash flow becomes a worthwhile consideration.

(Just personal observations and thoughts, not investment advice. Please conduct thorough research and assess risks before any operation.)