Lower transaction volumes would reduce its utility as a form of exchange. Then it becomes more of an investment tool than a transactional tool. Plus it would gravitate towards the hands of a few rich people, as with all forms of wealth since time immemorial.
In the long term, transaction levels and security are correlated. If bitcoin stops being
used, it will decrease in security and eventually go away.
Regarding a tangible real-world example of how currencies function when they are in limited supply and without a backing entity, see the so-called
"Swiss dinar" in Kurdish Iraq.
Thanks. I didn't know this on the transaction / security point.
I'll look at the other thing.