If someone believes the LTC/BTC exchange rate will increase then they would take that loan.
No, what im saying is that if you already have the amount of money you need in altcoins what would be the point of asking for a loan
It's very simple...they are asking for a loan despite the fact that they already have funds available.
They just don't want to risk their own money but hope to turn the loan money into a profit.
That makes no sense because they are giving a collateral thats worth 120% of the loan wich is THEIR money so they are actually risking more money.
Have you ever heard of leverage?
Lets assume you have 10000 LTC. and you think in the next 4 weeks LTC will go up drastically. You can now borrow 50 BTC and give the 10000 LTC as collateral. Now you buy more LTC with that BTC and now have nearly 20000 LTC long position. So instead of selling LTC and buying LTC ( ...) you can go the collateral loan route.
That is also how financial markets work basically, but due to repercussion, they can offer a lower collateral and thus a higher leverage.