The US dollar is used by just about all drug dealers, money launderers and human traffickers, yet we also use it for our daily transactions.

Well yes because the US dollar's value is regulated by economic experts. Bitcoin's core idea was always based on pseudo-economic monetary theories

Sure. GP wrote "found more use" - it's about relative not absolute value.

Because almost no administration was ready to regulate it until recently. Payment and remittances are such obvious use cases but if every transaction create a tax event, it's also too cumbersome to implement for most merchant.

If the government has to regulate cryptocurrency for it to be useful as a currency, then it's not very useful as a decentralized currency, is it? In my view, most cryptocurrencies (bitcoin, at the very least) are built on fundamentally unsound economic principles which incentivize hoarding and speculation.

To be fair, money has been around for more than 20 years and people still find ways to make it a vehicle for fraud.