I still don't understand the economics of a bitcoin...it's a made-up, decentralized currency that is worth something because a group of people say it's worth something?
John C. Dvorak once likened it to Beanie Babies
As a currency, it's really the alternative to the digital equivalent of money for whatever currency you come from. For instance, when you deposit cash at your local bank, that money isn't physically stored in some box with your name on it, it's simply counted and the value recorded in a database. That "money" in your account isn't any more real than bitcoin. What gives people faith in that money is the reputation of the bank, the integrity of the financial system, and the insurance of the government (FDIC in the U.S.)
What gives people faith in bitcoin is the decentralized system, which is a global system and maintained as long as you have people using bitcoin wallets and mining.
Ultimately, something has value for trade (as opposed to personal value) only if a group of people agree it has value, anyway. Even if a government issues currency and declares it has value, it doesn't mean squat if the people think it's worthless, as is in the case with runaway hyperinflation where paper money is only worth burning or wiping your butt with.
The speculative aspect of using bitcoin as an investment makes it more like a foreign exchange market than digital cash, and of course that means it's more volatile as long in this still relatively immature state. Eventually we'll see things settle down and more cryptocurrencies be able to be used more easily for buying goods and services - whether it's front-facing or on the backend.
Fiat currency is still more reliable and trustworthy and practical, but it's not infallible, either. People living in countries that have or had their economies collapse know this.