> I guess the math for such a business is: - User deposits crypto worth X dollars. - User can take out up to X * Y dollars as a loan. - If the value of the crypto falls below X * Y * Z, it gets liquidated

My understanding is (deliberately) limited here but I have friends who participated in this or some other scheme like it, and the point is just purely speculative gambling. Take some slightly legitimate crypto token, take out a loan against it to buy shitcoin, rinse and repeat while hoping that everything goes up forever and/or you cash out right before everything comes crashing down.