The fact that there are coins are not the problem that is defeating the idea behind cryptocurrencies but more of that fact that people are now creating cryptocurrencies that they do not intend to keep working on, scam coins are what are defeating the idea of cryptocurrencies. Currencies that cannot be used to do anything useful are what are flooding the market right now.
This is the right answer, the number of coins is not really the problem, the problem is that many of those coins are nothing more but an attempt to make money out of this market by the developers and most the time they have no intention of working on their coins at all, or they have the intention to work at the beginning and then they lose interest in the project and they let it crash.