> Nobody would be crazy enough to take a loan denominated in Bitcoin.

You have too much faith in financial literacy of the participants in this market. [1] It doesn't really matter as much as you may think because they (1) are using these casino tokens to borrow more tokens to buy yet more tokens and (2) they see liquidations as a natural part of such lending.

[1] https://cointelegraph.com/news/are-we-dumb-financial-illiter...