The true utility of a cryptocurrency is the blockchain itself as way to perform escrow, saving, spending, and transaction auditing without a human intermediary.
Despite all of this, I will grant that so far it would seem that the financial and material costs of crypto are higher than the benefits lowering overall utility.
Yeah, yeah, and reality has no meaning because everything is subjective. That's great as a dorm-room topic at 4am but it's not a useful distinction here because there's a huge practical difference. Bitcoin uses random hashes which nobody cares about except to the extent that someone else will give them some tangible value in exchange for them. That's different from almost any other fiat currency because most of them are linked to a functioning economy and have some built-in demand where a government requires use for taxes, procurements, salaries, etc. Quality varies, of course, which is why some currencies are stronger than others but Bitcoin is an extreme outlier in the sense that almost nobody has any need to use it except when they think it's financially advantageous.
This is why it's so volatile: someone who has purchased a lot of Bitcoin has an incentive to get other people to buy into the system so they can make money off of it but nobody else shares that reason. Using Bitcoin could make sense if it was cheaper but there are many alternatives and unless you have an ideological commitment you're most likely to pick whatever fits your preferred balance of easiness, cost, and safety. That could some day be Bitcoin but it hasn't been for the last decade and a half except in a few cases involving unusual circumstances.
Sure, there would be hobbyists who conduct trivial transactions with their monopoly money. But no, this would not even be a small fraction of overall economic activity in such a scenario.
Oh, and most importantly. When the U.S. government will allow me to pay my taxes in BTC.
Until then, this is a thought experiment. I'm not holding my breath.
https://www.nyc.gov/office-of-the-mayor/news/041-22/mayor-ad...
Landlords offering payment in BTC: https://www.american-apartment-owners-association.org/proper...
U.S. government allowing you to pay taxes in BTC: you can take your btc and turn it into usd and pay taxes that way - and would need to on your capital gains.
Lots of reading for you to do!
In that instance, bitcoin would lose nearly ~100% of its current market value due to anyone with a brain dumping it.