This is still a highly debated thesis. Just using BTC to store value away from a volatile fiat currency and eventually exchange for a different, more stable currency, is another candidate for the underlying valuation model, no widespread medium of exchange beyond currency trading needed.

If you live in Venezuela, converting to BTC even if you cannot buy anything with it but perhaps Columbian or Brazilian currency at a slight loss, is a hugely valuable capability, with significant advantages over both traditional fiat currency exchanges and custodial stores of value like gold.

What is the total global demand for cryptocurrency for this use case? Certainly not anywhere close to the total market cap of first world fiat currencies, but also probably still much higher than today’s total market cap of BTC.

This stands in contrast to smart contract and d-app marketplace currency like ETH, which has a completely different hypothetical valuation model.

Permanent deflation usually ends in hyperinflation. At some point the thing that your magic internet money represents disappears all at once.