I think this is a dubious argument. It describes what happens most of the time, when the value of the dollar fluctuates. But what if the collapse of the dollar is accompanied by a downfall of the Fed? Hyperinflation has happened in many, many countries that used fiat currencies, and even the US has had high inflation:
http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype...
Gold originally was the only metal colored like that (shiny) so it stood out, coupled with its scarcity it became a status symbol. It was the stuff of royality. It has some properties that make it useful in jewelry but pure gold is actually too soft for jewelry and is used mostly as alloys.
I am not saying gold (like other metals) doesn’t have its industrial applications, it does!
You can not convince me however that gold is inherently a better metal for jewelry than alternatives. It is only there to give jewelry that golden shine, which has been considered a status symbol. Now, if gold somehow became a "cheap" metal I don't think people would be keen on displays of their gold.
If the gold price collapses, you can sell it to jewelry and electronics manufacturers at some (low) price point. Gold has a weakness as a store of value because this price point is a lot lower than its market price during good times - and this is why Krugman is also not in favor of it as a store of value.
If the price of the dollar collapses, you can sell it to the Fed (usually indirectly - the Fed sells debt and then sits on the proceeds). This floor is pretty solid, cf. Volcker's recession in the early 1980s.
If the price of Bitcoin collapses, you can't sell the electricity used to produce it onto the grid - that electricity is a sunk cost. So what provides a floor to the Bitcoin price if for whatever reason its value suddenly falls? Probably only its utility as a medium of exchange, which in an era of electronic exchanges lasting fractions of a second probably doesn't provide a huge demand for the stuff.