One of the major problems with Bitcoin is that it is being treated as both a currency, and an investment vehicle.

As an investment vehicle, it's exactly as you say; there is no fundamental value it represents. As a currency, it has no governmental backing, and while it's possible to trade in currencies, the profit lies in the trade, and the various differing rates of exchange, NOT in the underlying currencies themselves. No one holds currency expecting deflation to make them better off.