Why do you believe a crash is forthcoming?
The actual number (BTC/USD) is mostly irrelevant,
Why do you believe it is irrelevant? The market capitalization is only 500 million dollars. Can you imagine operating an entire economy with only 500 million dollars? It's a proxy for adoption, although that is muddled by price speculation and so on.
but volatility is quite bad for people who actually want to perform transactions with BTC. I hope BTC is able to get over this and continue growing.
The bitcoin economy is very tiny. Google probably makes more money than the entire bitcoin economy in a year several times over. Of course, it's going to be volatile. That's because we are growing. It would be a more legit concern if that the economy is worth 100 billion dollars or a trillion dollars.
2. It is irrelevant because you can use any sub unit down to satoshis to transact. If you want to use BTC as a currency and perform transactions, the exchange rate number is irrelevant, because it doesn't matter if a widget costs 1BTC and the rate is 1 BTC/USD or if the widget costs 1 satoshi and the rate is 10,000,000 USD/BTC. If you're a currency speculator OTOH, yes the rate matters immensely. Which goes back to my point - is BTC there to provide an alternate currency and associated economy, or just an easy way to gamble?
3. You're using the terms "market capitalization" and "economy" interchangeably. The economy implies the size of goods and services produced in the BTC universe - this number is important but seems largely ignored by the BTC community (in fact, it seems to not exist). Market Cap here means # of bitcoins multiplied by the USD exchange rate. This number is closely followed by the BTC community, but is large meaningless. It has spiked 3x in two months, but what has happened to the BTC economy itself? It seems to have grown, but can anyone say definitively?
There is a lot of uncertainty here. Intelligent, rational people disagree wildly on the future of Bitcoin. There are all kinds of risks: legal, technical, and competitive.
If the exchange rate crashes, and takes a long time to recover, you'll feel justified in calling all buyers "speculators feeding the hype machine", when in actuality many of them were simply wrong, or early.
2. False dichotomy. Some people are speculating. Others are using it to exchange value. Inventions don't need teleologies.
Your concern, if I'm understanding you, is that speculators are harming Bitcoin's potential as an alternative to the current economy. I wouldn't worry about that. The exchange rate is either going to $0 or $1000+, and the behavior of the community short-term isn't going to affect that.
Obviously, I'm long Bitcoin. See this blog post from 2011: http://andrewbadr.com/log/10/bitcoins-and-why-im-buying/
There's the fact that the Euro is in trouble. There's the fact that provable odds gambling has been implemented (a powerful factor in the US). There's the fact that ASICs are coming out. There's the fact that it's becoming countercultural and hip to accept them (see Mega and Reddit) There's the fact that every time the price goes up more mainstream articles are exposing people to it's concepts, driving demand by more. Now it could well be bubble mark II and I DEFINITELY expect a correction: it's a volatile market. But there's certainly some massive growth underneath the massive speculation.
Avalon, the first ASIC producer to market, require payment in bitcoin. I believe BFL require payment in bitcoin for orders outside of the US.
This created demand for bitcoin, which raised the price against the dollar. Others saw the rise and were encouraged to buy in or order ASICS, rinse and repeat.
As far as I know the only service that is turning over serious numbers is Silk Road. I guess you could also count Satoshi Dice, but I am sceptical about their long term future.
Due to the nature of bitcoin, it's entirely possible that the black market and wealth transfer functions of bitcoin have grown to support the current value, but the arrival of ASICS is too big of a coincidence for me.
I do remember that there was a Bitcoin crash around November 2011, though, so maybe you are right that it will happen again.
Emphasis mine. That seems crazy high. How many million dollars would you pay for all of the existing bit coins?
For stock market valuations, though, that question is much more productive.
First, I wouldn't call bitcoin user base community. It is like saying the dollar user community.
Secondly, it is definitely not true that everyone in the bitcoin userbase focuses on the exchange rate. There are lots of people with different and varying goals.
Bitcoin users meetups, non-profit organizations dedicated to supporting bitcoin, bitcoin related community, miner consenus and voting, are not evidence of a "bitcoin userbase community"?
Would you say investment clubs are dollar user communities?
The dollar is not modeled to meet a specific philosphy or technical implementation nor does it have the same degree of novelty. There most certainly is an enthusiast community for Bitcoin.
Can you back that up somehow? It seems like we're in a rally based on the price.
The actual number (BTC/USD) is mostly irrelevant, but volatility is quite bad for people who actually want to perform transactions with BTC. I hope BTC is able to get over this and continue growing.