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I don't understand. Cash and other liquid assets are not typically used as collateral for a loan. Etherium is a crypto-currency, right? I.e. it's liquid? Collateral is almost always something like a house, or shares in a business. If you already have liquid assets in the amount you're borrowing, why are you taking a loan and paying interest as opposed to just using those liquid assets?

[v64]

If you sell the Ether, you no longer have the Ether. If while you're holding the loan the price of Ether goes up, you benefit from that. Of course, if the price of Ether goes down, you're at risk of having your loan liquidated, but that's a requirement imposed by the system to maintain the Dai peg.