However, it occurred to me that bitcoins would make the most amazing collateral. No one in their right mind would consider defaulting as prices rise. Suppose with btc at $1000 each. You borrow $1000 against a coin. BTC rises to $5000 per coin in the time before the loan comes due. I am pretty sure you would find the $1000 to get your coin back one way or the other.
That won't work. If the lender believes that Bitcoins are so likely to appreciate, he'd just buy Bitcoins with his money instead of loaning them out.
Your entire chain of reasoning starts from an impossible hypothetical where there exists an asset that is sure to outperform other investments that people might consider. That is impossible. If there ever were such as asset, nobody would invest in anything that wasn't expected to outperform it.
There's another reason the scenario imagined is impossible. It requires people to value a Bitcoin next year higher than a Bitcoin today. But that's impossible. Clearly a person would rather have a Bitcoin today than a Bitcoin next year because one of the things you can do with a Bitcoin today is hold it until next year. A Bitcoin today includes as part of its value the right to hold it until next year and enjoy its higher value if its value is higher. So everyone would have to be irrational to value future Bitcoins higher than present Bitcoins.
In fact, it was just this kind of reasoning about home mortgage loans that lead to the financial system's collapse.