That is the exact thing that everybody warns about for deflationary currencies so of course they were skeptical about it. Combine the gratuitous use of processing and power for speculation you can see why they would be less than sanguine about it even before money laundering got involved.
> Well being a medium for exchange is what gives bitcoins value.
I do want to separate out the concepts of "utility" vs "market value".
Probably a good example for this is a hammer. It has a great amount of utility for pounding in nails, securing lumber, etc. It's just not valued on the market though. $5 bucks maybe? You will save a bunch of time using one. However, being able to pound in nails doesn't justify a high cost in and of itself, since the market is flooded with them.
If, however, the utility of bitcoin(medium of exchange) is the only thing that is lifting bitcoin's market value (price), then its price depends upon it outperforming other cryptocurrencies and instruments of money. And the marginal cost of creating another cryptocurrency is maybe a weeks worth of time?
Because there appears to be an unlimited supply of numbers and algorithms, the market value of any cryptocurrency should approach zero over time even if it has great utility.
Or we were just chalking it up to "Irrational Exuberance." Instead of addressing initial concerns economists had about it, most proponents were arrogant in their belief that old school economics wouldn't apply to cryptocurrency.
And that gets me to the second point. The people arguing for cryptocurrency weren't transparent in their holdings of it. And that seems to be what created the bubble. Now people are questioning where the basement price is on bitcoin, and it seems like there's nothing but arguments like "It's the money of the future".