I share your concerns, however we already have assets with deflationary values like gold. I'm wondering why hasn't every saver already put all his money into gold? Is it just because you can't use it to pay small amounts (like rent and food)? Or is it because other investments like bonds and stocks have better returns? If the latter is true then I wouldn't worry too much about bitcoin.

If a cryptocurrency is too deflationary then most people will only lend it at very high rates. This leads to hoarding rather than investing. Consequently such a cryptocurrency will not find much usage for transactions which in turn will decrease its value. I think this will naturally lead to the adoption of currencies with stable values, where the supply is adjusted for demand - ie. the system which is supposed to be in place today.

However central banks have recently gone out of their way to flood the markets with cheap money without inflation increasing notably while at the same time punishing lots of savers with ever lower interest rates. Cryptocurrencies like bitcoin might serve as an important protection against such extreme monetary policies and simply limit a central banks ability to implement monetary policies. This is why I view cryptocurrencies not as an asset which in the future will dominate all other currencies but as a defense for savers against overzealous central banks (or governments for that matter).