Your right on the first point, but I would consider the “productive output” to be the product and services that ultimately drive the trade. While there are plenty of contemporary hedge funds that would disagree with me here—with few exceptions, simply moving numbers around, constructing high-level abstract financial instruments, and/or arbitrage trading is not what I would consider productive activity. After all, if there are no firms designing widgets, mines digging up widget ore, factories making widgets, logistics moving widgets, stores selling widgets, technicians supporting widgets, or consumers using widgets, then there quite literally is no market.
Cryptocurrency has precious little to demonstrate itself as an analogous store of value to legitimate, organic market activities. It’s primarily been a tool for speculation, as well as evading regulatory and legal scrutiny. I believe Bitcoin has been an incredibly valuable and unique experiment, a fascinating exploration of human nature and our culture of trade. Much of the technology behind it, like the blockchain have found useful applications, but mostly outside of cryptocurrency proper. But it’s been long past the point where, if cryptocurrency had a unique purpose with which it was particularly suited towards, it should have found that purpose by now.
If one takes a strictly amoral perspective, then I suppose the cultivation, manufacture, transportation, sale, and consumption of illegal drugs would technically fit within my prior definition of “productive output”. Whether or not that’s worth its own overhead, complexity, inherent risks, and the collateral consequences to most/all of the humans involved with that productivity is a larger question…and to be fair, a lot of those concerns are nothing new or unique to cryptocurrencies.
But if the intention is to weigh a given currency’s efficacy and inherent value against a broader slate of considerations then, in my opinion, the most definitive distinctions by far between cryptocurrencies and traditional sovereign fiat currencies is the tangible, productive, economic output of its respective national domestic industries that naturally selects and underpins its perceived value and stability.
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TLDR; it isn’t some collective delusional belief that makes a dollar worth a dollar, but rather the aggregate sum of the American people’s labor and dynamism, which isn’t nearly so easy to handwave away, as some of the more myopic cryptocurrency advocates have been known to do in an attempt to undermine traditional financial systems, and draw a misleading distinction between fiat currencies and cryptocurrencies.
