I work at Dharma with Nadav and am happy to shed some light here.
Your point is well-taken and definitely a risk. What lenders plan to do, for loans collateralized by crypto, is overcollateralize substantially.
So, for instance, in order to take out a 50k USD loan, you may need to put up 2.5-3x of the value in ETH, say 150K USD worth of ETH. This protects against some of the volatility (though definitely not completely).
Your point is well-taken and definitely a risk. What lenders plan to do, for loans collateralized by crypto, is overcollateralize substantially.
So, for instance, in order to take out a 50k USD loan, you may need to put up 2.5-3x of the value in ETH, say 150K USD worth of ETH. This protects against some of the volatility (though definitely not completely).