Joe wants to buy a new car. He has bitcoin, but of course, he does not want to give up his $50,000 bitcoins expecting them to be worth $100,000 next year. Spending deflationary currency comes with it's own expensive repercussions, as anyone who as ever spent cryptocurrencies can attest. So Joe pawns (gets a loan on) some bitcoins. The bitcoins are locked into a smart contract. The bank advances Joe $50,000 on two $50,000 bitcoins. Joe pays back $1000 a month worth of stablecoins, and when he pays back the $50,000 his bitcoins come back to him, probably worth $250,000 by then. If he fails to make a payment, the bank gets his coins. There is a great incentive for Joe to pay, and essentially no risk to the bank. The bank can charge some nominal interest for an easy profit that in the end costs them essentially nothing.
Expecting this to be the case is unrealistic. For one, the volatility of bitcoin makes the risk of borrowing against it extremely high. If the price falls steeply, you'll be required to put up more collateral or your coins will be liquidated. And we've all seen how frequently bitcoin undergoes steep drops. Also, to compensate the risk, the interest rate you pay is likely not going to be competitive with fiat loans. And lastly, expecting bitcoin to only go up in the long run enough to profit off borrowing against the value is a foolish expectation. There's never been an asset in the history of the world with such properties; it breaks the laws of economics. In short, this scenario acts like there's no risk, and it couldn't be further from the case.