Scarcity is important, but it's not the only reason bitcoin has value. Don't get sucked into the "what is it backed by" fallacy. Bitcoin is money, and as such it doesn't need to be "backed by" anything else. (What is gold "backed by"? Nothing, because gold is money. Fiat needed to be backed by gold because fiat is not scarce.)

Bitcoin fits the properties of money, and thus does not need to be backed by something else.

It's durable, divisible, fungible, portable, verifiable, and scarce.

History shows these are the properties that a given commodity must have for human beings to naturally and voluntarily converge onto using it as money.

The appreciation in bitcoin's "price" is evidence of the free market adopting it as a monetary good and a store of value. Volatility is a natural symptom of fickle human beings, not a lack of stability in the properties of Bitcoin.

Bitcoin is 16 years old and there are $900T of dollars and dollar denominated assets sloshing in and out of Bitcoin's $2T market cap. Of course its fiat-denominated exchange rate is volatile.

The free market values Bitcoin not only because it fits the properties of money mentioned above, but also because it comes along with its own monetary network.

That monetary network enables the transfer of value over a communications channel, without the need for or permission of any third party.

Imagine being able to dematerialize a billion dollars worth of gold and send it to anyone in the world, cheaply and almost instantly, at any time.

And it can't be stopped, seized, confiscated, or frozen.

Their argument that it would lose scarcity if it became widely adopted is nonsensical. The supply of Bitcoin is fixed. The supply cannot be increased beyond 21 million. If demand increases, the result is an increase in the fiat-denominated price of Bitcoin.