The newness indeed brings about the volatility of BTC, but not only that, theres also the fact that BTC supply is still continuously increasing. Yes, it has a limit, but since it still hasn't been reached, naturally, price would continue to fluctuate.
AFAIK, governments do not set the value of fiat currencies, but they generate the legal tenders which has to be accepted anywhere it is presented within the country. The economy of the nation determine the value it is traded for in relation with other currencies and this reflects on it's actual value.
Value of currency in simple terms is dependent on its supply and demand. More specifically, how much dollar can buy in other currencies, values of Treasury notes ( since they can be exchanged to USD), and amount of USD foreign governments have. The more they have, the rarer the currency is.