It's already collapsed twice after major price increases, first from (iirc) about $30 to $3, then from about $240 to $60. It looks to me like we are having speculative bubbles, but it's on top of a major long-term growth trend.

I think most people heavily into bitcoins understand it only has real value if it's spent as currency, and there's been a lot of work on getting merchants involved. The easy way to handle things as an investor is just to keep your investment, but when you want to spend money on something, buy additional bitcoins with your dollars and spend those. This wouldn't be an option if bitcoin were the only currency, but if you've got dollars too then the bitcoin deflation isn't a problem as long as conversion is easy.