It's only avoided b/c in traditional economies there is no way to subdivide units of a denomination. (e.g. There is no way to split a penny into thousandths) Cryptocurrencies are purely digital and do not have this limitation. The only limitations are self-imposed by the algorithms themselves.

If Bitcoins were the dominate and only currency, people would continue to buy food, clothing, luxury goods etc. b/c they need or really want those things and will be willing to trade bitcoins in exchange for those goods. Practically, Bitcoin is unlikely to be the dominate currency allowed in countries to participate in transactions without incurring significant taxes, so likely people will store wealth in Bitcoins(or other cryptocurrencies) and then convert to fiat currencies as they need to make their purchases.