What is the US dollar backed by?
Pure force only. But I'm not here to defend the dollar. Paper money wouldn't exist in a free market either. Only paper currency, backed by gold (or other commodities).
Like the US dollar, Bitcoin is backed by the people who use it.
Nobody would use paper money in a free market. The dollar is backed by force. Bitcoin is backed by fear. That's my view until I'm convinced otherwise.
You can take your Bitcoin and you can exchange it for goods at Dell etc, this is what gives it value.
But WHY can you exchange paper money for goods at Dell? Because the store is forced to accept it! No way they would accept worthless paper notes backed by nothing in a free market.
Inflation caused by other cryptocurrencies do not have a significant effect on Bitcoin, much in the same way inflation caused by Bitcoin doesn't really have a significant impact on USD.
If everybody started using Bitcoin, it would have a huge impact on the dollar.