Well, yeah, most currencies are defacto backed by military force. That fact creates bad incentives.
Crypto doesn't have this luxury, it can be only be backed by the trust in code. If the currency is trusted - because it's open-source, open for all to use, is well designed - it's value is going to go up. See Bitcoin and Ethereum as best examples of this.
This make a decision whether to use a particular coin similar to choosing Python vs JVM and their ecosystems.
To be fair, I don't think stablecoins work well in that context. The information on how they are backed is not completely public, the companies issuing stablecoins are not that well audited...They are blobs of closed-source "stuff" that look like 1$
The theory is that the market can efficiently decide whether the code actually does work. But the practice is that you can make billions tricking people about what the code does. And often it's people who have never even glanced at the code telling you what it does. I would wager good money that there was no one invested in UST that understood the code.
I'm not saying crypto has no value, but I'm saying it's not comparable to a modern currency. You might be right that it's similar to some historical examples of weak upstart currencies most of which failed, but even those were backed by a lot more than just... what? In this case we're literally comparing to currencies that are often backed by nothing.