This volatility isn’t something inherent to all cryptocurrency - bitcoin and eth and pump and dump cryptos are just especially hot speculative assets for people who enjoy holding bags and pump and dump YouTube grifters.

Tradeable essential goods aren’t a good basis for currency, they would be your best bet without the internet, but with the internet in such a collapse cryptocurrency could actually work.

Diversification is not a concept in opposition to cryptocurrency, the former is a viable financial principle for savings and investments, the latter is one type of asset (a currency) that someone can hold if they choose to if they believe that centralisation of financial institutions and growing connections between corporations and governments is a risk - for instance I would not expect S&P500 to survive a major climate or landemic catastrophy/incident, world war, especially with protectionism, and maybe I’m an alarmist prepper but while remote, these things are growing increasingly likely or if the oversight of the powers that be is undesired e.g. such as with buying drugs on the internet.

Ultimately it all comes down to that.