Money has usually three functions, at least any useful currency does. It serves as a medium of exchange, it is the medium of account, and a store of value. Being the medium of exchange means that money facilitates trade. All goods are being sold for money, and all goods are being bought with money, thus eliminating the "double coincidence of wants" that barter trade would require. Being the medium of account means that all goods are priced in terms of money, such as the US dollar. The US dollar is an international currency because a huge part of world trade (think commodities and oil, for example) is traded in US dollars even if the trade takes place between two countries other than the US! Being a store of value means that money should also keep its purchasing power roughly stable. With a 2% inflation target, the dollar loses about half of its value in about 35 years.
When it comes to Bitcoin, it should be said that it does not possess any of the three functions a currency should have. It is not very useful as a medium of exchange. Signing up one of the Bitcoin exchanges seems to be a rather cumbersome and risky business, with lots of fraudulent activities taking place. It does not serve as a medium of account because very few goods are actually priced in Bitcoin. Third, it is a horrible store of value because its price volatility is extreme, even much more so than gold. It would thus make more sense to speak of crypto-assets instead of currencies because they really do possess any of the three useful properties that a standard currency requires.
The chart below shows that Bitcoin has lost roughly 80% of its value since the peak about one year ago. The fundamental value of any financial asset is equal to all future income streams derived from that asset discounted with the real interest rate. This is true for stocks as well as housing. Bitcoin, however, does not have any future income streams. Part of its value is surely based on the "greater fool theory", meaning that you buy the asset and hope that its price increases so that you can sell it subsequently to a greater fool and getting a profit out of it too. Some of the value is derived from people using the unregulated currency to avoid capital controls. One way to get money out of China where capital flows are heavily regulated would be via Bitcoin exchanges. Third, one can use the currency to engage in fraudulent behavior and to avoid banking regulations.
While the value of Bitcoin is surely not zero at the moment (though it could be one day), there is really no way to establish a fair market value for this asset. It derives its value from speculative and fraudulent activities. Holders of crypto-assets have lost a lot of money over the last year and are bound to lose even more now that the bubble seems to be deflating. It would be no big loss for humanity if all this crypto-currency nonsense will end rather sooner than later, given that the "mining" of Bitcoin is a nonsensical (unproductive) and also environmentally damaging activity as it requires a huge amount of electricity consumption.
The price of Bitcoin (in Euros)