I think monero's niche is in *cough* blackmarket *cough* (quite unfortunately), but also in some large items that might garner public/friends, relatives and neighbour's interest. For example, buying/selling a house. It is also likely to be used as a store of value, since it is convenient in that it hides your net worth. I think this is where monero is stronger than bitcoin.
Monero needs to have a very significant legal, mundane, use, for at least three reasons.
First, having a significant legal use means that at least some jurisdictions can't just ban it, and criminalize anyone found running a monero node. If the vast majority of Monero use is illegal, this could be done. Note that this doesn't prevent illegal spying/compromising, nor more targetted attacks, and it doesn't prevent full criminalization in all jurisdictions, in case someone might want to pretend I claim that.
Second, having more uses brings more people, liquidity, decentralization, and hash rate. All are good, directly or indirectly, for Monero's security and usefulness.
Third, it's a point of principle. Normal run of the mill people conducting boring transactions have the right to privacy, even if it's being shredded and stomped over every minute nowadays. Monero can serve as a light of hope that privacy is still possible, maybe encouraging others to being privacy helping software in other areas.