The true value of a currency surely is a function of supply and demand. Use in transactions represents one type of demand, but there are others. And I think there are a lot of real world examples where volatility in currency values has not inhibited its use in transactions.
The
price of a currency is a function of supply and demand. The value is measured in different units ("utils" if you like). You're perhaps thinking of demand stemming from a currency's role as a "store of value", but this is an off-shoot demand from its use in transactions. If you did not expect to be able to use the currency in transactions in future, then it would not function as a store of value.