If we are Saying fiat is backed by fighter jets then Bitcoin is backed by selling dangerous fake MDMA. That’s if we are getting into that way of arguing which hopefully we are not.
If you're being serious, the safest drugs were the ones sold online using Bitcoin. The Silk Road was actually an unbelievably reliable and safe way to acquire drugs. A system for rating vendors and reporting issues, incredibly competitive market that put pressure on vendors along with delivery right to your home or the closest post office by the USPS instead of having to either meet a dealer in a sketchy part of town or have them come deliver it to you themselves.
Bitcoin does seem to depend to a large degree on money laundering and speculation on money laundering.
You might not like it, but that is definitely the reality. Other kinds of currency and investment are a few times more useful as long as you are doing legitimate business.
The Bitcoin network could happy live without those things, as could trade, but price action depends on them.
For example the 10000 BTC pizza was one of the early purchases. If BTC stayed at 0.1c then you could still use it and it was used.
Caveat to this is now the mining infra means that returning to 1c coins would kill Bitcoin as a secure network since no one would mine for profit - the only reason to mine is the 51% attack
Fact is that Bitcoin is used a whole lot for laundering and transferring money in illegal businesses or across borders without taxation. The "legal" part of Bitcoin transactions which aren't just for investment or speculation, like "Pizza sales" or something, are, for one thing not that practical, for another not that popular or significant.
So it does stand to reason that most of the speculation is around the use of Bitcoin for laundering money. And even those with the best intentions are helping the money launderers by keeping the network alive and secure.
I mean you can have nodes, miners, block creation without the dark things you mentioned. Bitcoin price might be lower.
But this is hypothetical anyway because with ASIC mining and dedicated power plants you can’t go back to a low price (other than zero i.e. network trust is lost!).
I would imagine even $1000 Bitcoin now would introduce issues of too much hash power. With too much has power and not enough mining incentive in USD terms you’ll just get network attacks.
Exactly what bitcoin is backed by is something of a mystery for economist to debate. Much of it is people speculating, but I don't see anything unreasonable with saying much of the value, at least pre-speculation, is from its use to carry out illegal transactions. There is some use in other areas so I wouldn't say it was ever entirely the case, but I don't see what's wrong with arguing it was a major factor and is still somewhat of a factor. I do expect between speculation and alt coins better made for hiding activity it is a small and shrinking factor now, but I could be wrong.
