Investors or lenders don't fear the volatility. What they fear most is the security of the platform where they have invested their money.
Someone who invests in defi or lending platform understands the volatility of cryptocurrencies as from the beginning it has always been.
I understand the point you are making, and I agree that investors and lenders in a way thrive from volatility, it is the bread and butter to making profit. Similarly, there will be no room for further discussion for any platform where security isn't in place - that must come as top priority.
Would ETH be able to rise against its predecessor BTC? Well, I think this depends on how well DeFi will do and how high smart contracts can take this. However, one possible roadblock to this is the huge fees... I think this is the grey area most people are concerned with regarding ETH