It needs both.

It differs from modern fiat in that the issuance is fixed and consensus over the ledger is decentralized, but like modern fiat it is a theoretical money where the ledger is not grounded to any physical reality. There is no guaranteed 1:1 exchange of Bitcoin for something of known value. So stability is gained though perpetual price discovery in the exchange of real goods and services of known value. Currently the majority of Bitcoin is not exchanged this way but rather exchanged for fiat, and so the theoretical value is speculative and subject to the rise and fall of hype. That's why it is so volatile. I've heard all kinds of abstract nonsense about Bitcoin being backed by electricity or computer hardware and what not. The cost of being randomly selected to add the next page to the ledger is not a backing of value in the practical sense, such as the way bank notes used to be backed by gold. There's no guaranteed exchange anchoring the unit if account to physical reality. It's a theoretical money with floating value that must be perpetually discovered in the exchange for things that are real. If you lock up the entire UTXO set among holders who don't want to exchange it then the value essentially vanishes because it's not being proven in exchange.