It's a combination of things: volatility of value and heavy dissuasion by the government from interacting with it. That's what keeps it fairly fringe. Much more so that the fabled "bad UX" which is just, meh, it depends, it can be wrapped up nicely where that's needed.

It has mostly worked as currency for digital things, even from the very earliest days (some of the very first real world adopters were VPS providers). Because that's somewhat outside govt jurisdiction and the transaction is fast and seamless anyway with no physical shipping.

Take a look at south america; even for the non-currency store-of-value use case, stablecoins have done better, even though they're custodial, they don't feel custodial. Not to mention the currency use case: people use stuff like Tether to buy real estate, very few indeed get bitcoin involved in that process. People tend to want dollars for storage, and things like bitcoin more for long term investment/hope of gain instead.

There are cases where bitcoin theoretically makes sense: a nigerian businessman sourcing from a chinese supplier, where going via bank rails might be nearly impossible. Crypto in general has made huge inroads there, despite its extra insecurity and trust requirement, over bitcoin in particular, though that's not to say the latter is never used. Heck, I buy lots of things with bitcoin, since it's often offered as one of a set of possible crypto rails.