What I am seeing here is that you are allowing BTC loans with XPY at current value as collateral, and then paying back the loan (after default) with XPY at the new current rate (always lower). That = ability to short XPY. That sir, is completely insane.
I'd take advantage of this, but it's not worth the risk that these BTCLend people will just cut and run after a "hack" or whatever before they actually issue the loan.
Yeah, this guy is talking in circles and makes no sense.