Let's say I'm convinced bitcoins will be worth at most $1k next year. Let's also say you have a bunch of bitcoins you're planning on sitting on for at least a year (since you're convinced the price is only going up and up).

What you then can do is lend me your bitcoins for a year and charge me interest on that loan as a way to generate some cashflow on an asset you where just going to sit on anyway.

So I'll borrow a bitcoin from you, sell it for $20k, and use some of that cash to pay you your interest. Now 1 year later I have to give you your bitcoin back. If I'm right, I can now buy a bitcoin for $1k on the market, give you the coins and pocket the difference as profits. On the other hand if bitcoins have gone up to $100k I'm screwed since I need a bitcoin to pay back my loan, and will have a loss of $100k-$20k = $80k.

An option lets me lock in the price I have to pay for a bitcoin in the future. I know that no matter what happens to the price I need to buy a bitcoin one year from now. So by taking out a call I'm buying insurance that no matter what happens I will never have to pay more than $50k for that bitcoin and thus I've capped the maximum amount of money I can lose on the deal to $50k-$20k=$30k. Without that my losses are potentially infinite.