First of all, let me say that I am no expert on cryptocurrencies. Malaysia is not one of the countries where the exchanges, such as Coinbase, are fully available (we can only set up a wallet). So I can't officially and easily buy cryptocurrency with my fiat money. I believe its because those exchanges can't set up clearing arrangements in Malaysia, where our Malaysian Central Bank (Bank Negara Malaysia BNM) is the clearing house.
The people (designers, miners, exchanges, buyers and sellers) participating in cryptocurrencies have many different objectives and agendas.
One category of participants would believe that the cryptos will eventually replace the present fiat currencies. That means at a certain point in the future all daily transactions will be conducted via cryptocurrencies (perhaps with precious metals used as physical forms of wealth storage). This situation will occur with the failure of the current fiat money financial system due to the deficiencies (QE, unlimited creation of debt based money ...) and the availability of alternative decentralised digital currencies without those deficiencies.
Thus these "purists" would generally only be converting their "surplus" fiat into their chosen cryptocurrencies. The earlier the conversion, the more the cryptos they will have when the awaited day in the future without fiat currencies arrives. They are not concerned about the daily value of their coins in current fiat currencies as they are not traders (they don't sell their coins, the daily price is only of concern as the conversion rate determining how many crypto coins they can buy that day).
Of course there are those who want a balanced holding of cryptos and precious metals, so they may sell some coins for fiat to buy precious metals (or vice versa if precious metals prices go up faster than cryptos).
The traders (or speculators) are concerned actually with their wealth in fiat currencies. They are "present-day" people and are not "future-proving" their present wealth. A simplistic example would be one who sees his Bitcoins go up USD 300 each today giving him a profit of say USD300,000, which he sells to spend it on a yacht.
Of course there are many shades of grey, so there are other categories of participants. I have nothing against trading and profit making. But is there a danger of losing sight of the forest for the trees?
If my musings above are erroneous, please let me know. I am ever willing to learn in this new thing.
Karl Denninger has written a provocative post on 17 June 2017 titles "Digital Currencies are ALL A Scam".
https://market-ticker.org/akcs-www?post=232141
If what he wrote is accurate, I would understand it to mean that that as nodes in the blockchain do not get a fee for validating, so with increasing costs to mine the remaining coins, and the reducing available coins due to reaching the limit and also losses, will cause the cryptos to "die a natural death". I hope someone, more knowledgeable than I, can write a post so that we can be educated and reassured.
Karl is a hard head. A smart hard head but a hard head nonetheless. Somehow, he never gave cryptocurrencies a fair chance. He is fully entitle to his opinion but I always found it a little bit disappointing that he never seem to consider this a pure and simple free market experiment that should prove whether it has its own legs to stand on.
Anyway, even if he is right, the market can stay irrational for longer than he is able to write the 'truth' about all those SCAM digital currencies.