Just like any other currency, from the US dollar to the money in your Paypal account, currency primarily has value because we all agree it has value. Meanwhile, secondary factors include: a limited supply, a demand for it, use-value in an economy that accepts it in terms of exchange-value, because there is work behind it, etc.
The same is true for cryptocurrency. It has little inherent use-value, with the same being true for bank credit in a bank account, but it none-the-less has value in the modern economy.
We agree it has value (for whatever set of reasons), thus it can be traded for other things with value (such as real world goods and services).
With that in mind, although it is like centrally-backed state-issued fiat currencies in many ways, there are notable differences. The main differences being it isn’t backed by a central government, it isn’t regulated by a central bank, and you can’t use it to pay your taxes (it isn’t legal tender).
Labor Theory of Value and Cryptocurrency: It takes a work to confirm cryptocurrency transactions, secure a cryptocurrency network, and to mint new coins. Specifically these things take the “hash-power” of miners (who confirm new transactions and in the process secure the system and create new coins). That work isn’t for nothing. The work produces a secure ledger and secure digital decentralized currency usable on the internet anywhere in the world (so the value also represents the value of having a sort of decentralized digital bank, accountants, and system of digital currency). When we take wheat and turn it into bread, the work done adds value to the final product. Bread has more value than wheat on the market. When we take computers from around the world and turn them into a network that secures and creates a decentralized peer-to-peer one world digital currency, that has value.
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