One reason for insulation in the floor above is that the crawl space becomes cold in the winter due to open vents. These vents should be closed permanently, which would make a huge difference in the temperature of the living area above. Fiberglass insulation only works in a closed cavity, it is loose and air passes right through it. When it’s between the joists in a vented, dirt crawl space, with the paper or foil side up, and the unfaced side down, it’s not doing much at all to conserve energy or prevent cool air from reaching the home above. Paper-faced insulation becomes mold candy in a dirt, vented crawl space.
Insulation should always be installed against the air boundary surface of the house. In a healthy, properly functioning crawl space, that surface is the crawl space walls and floors. The wood floor system above is full of gaps, joints, and chases for wires, pipes, and ducts–so it’s not the air boundary– and it’s the wrong place to insulate the crawl space with no vents.
Mold grows on insulation because it has some organic material in the resin used to set the fibers. A last important note: when fiberglass insulation is just a little damp, it loses a whole lot of its insulation value.
So what is your fiberglass insulation doing in your dirt crawl space? Not much.