The number of bitcoin transactions per day has remained roughly constant since February. The price of Bitcoins however, has risen by 1000%.
Do you have any evidence to suggest that people are actually using Bitcoins? Because the hard evidence I've got seems makes it seem like Bitcoins are getting traded like crazy, but not necessarily used.
http://www.dailydot.com/news/bitcoin-legal-sales-higher-ille...
Bitpay may be growing, but Bitcoins in general are not.
So, 22M BTC valued at $1T USD comes to $45K USD/BTC.
I have invested less than two thousand dollars into BTC. I consider it an epic gamble, but honestly, not an enormous one.
On the other hand, if BTC does 'go long', I could very well be in 'good shape'.
Here's the other consideration: the more unstable other currencies are, the less people all over the world trust their central governments with their currencies, the more likely people will move their money to a currency with no central control at all.
BTC is indeed turning into the place you put your money when things are scary. And there's a lot of scared people right now. Whether that anxiety is well considered is a separate question, and one that hardly matters.
Asking the wrong questions is silly. When bitcoins are used, that is when they'll be a serious currency. A bitcoin enthusiast should be looking at the number of bitcoin transactions and hoping it rises.
The price of bitcoin is irrelevant to its value to consumers. On the contrary, the more stable the price, the better.
Merchants want the opposite. Merchants right now are pissed off because they just finished setting their prices at 1BTC per widget four months ago, but today they're only getting 0.1BTC per transaction.
Merchants are receiving less and less bitcoins everytime the price goes up. Merchants want BTC to go down, so that they can sell the same stock for more BTC.
Its like the whole thing that happened to the Japanese Yen between 2008 and today. As the Yen strengthened, Nintendo lost money. Even though the Wii was selling in record numbers, Nintendo lost revenue as the Yen grew stronger.
Similarly, a Merchant based on BTC today is making 10x less bitcoins per transaction. That is BAD for business. Furthermore, merchants are now forced to consider the highly fluctuating exchange rate as part of their business.
I can certainly tell you from a business perspective, $2B of money supply is A LOT more attractive than $200M.
The USD money supply is around $3T or $10T, depending on whether you are counting money multiplied by leverage. The US GDP is $15T. If we presume that a currency then should be on the same order of magnitude of money supply as the GDP or transaction volume, it's not hard to project a $100B+ supply of bitcoin. With the supply currently at $2B, there is a lot of room to grow. I have no idea if this analysis is reasonable, but I suspect it is close to the "story" behind the bubble.
Of course all of this presumes that bitcoin will prevail as the leading crypto-currency, regulatory hurdles will be surmounted, and the currency remains secure. Those are not implausible ifs. In fact, I'm a big believer in the future of bitcoin, even if it is getting a little ahead of itself.
I anticipate a significant collapse at some point, regardless of the success of bitcoin. That crash may very well be from $1000 to $200 though.