Bitcoin was and still is an incredibly small market, even at the recent high of about $30 the entire economy had an approximate valuation of about $200 million which is tiny on a global currency scale.

The number of BTC is finite. As more people come to desire bitcoins, that means there are more dollars chasing up a relatively stable number of BTC. Assuming BTC is destined to become widely adopted on a global scale, $30 is still very cheap. There is nothing unhealthy about the present growth, it has had frequent downward corrections as the price has risen; this is indicative of healthy growth. At some point in the future the growth will likely taper off to a more "normal" rate.

a thing is always worth what you pay for it.  if it isn't worth it to you, you don't buy it.  but you have to eat.

Bitcoin is a deflationary currency - the worth of it is likely to go up pretty much continuously.  this means that it encourages - strongly encourages - saving money and building wealth.

saving money is a good thing.  look at what's happened to the economies of the world as the god of consumption at all cost has overtaken even those very fiscally conservative nations like japan.

on the other hand, you have inflationary national currencies, like... well... all of them.

in 1959 i paid 21 cents for a quart of milk.  and about the same for a gallon of gas.  perhaps i regret not buying more at the time?  in a sense.  just like today, when gas went from $3.69 to $3.79, i regret only having filled my tank half-way, yesterday.

we are all better off with a deflationary currency.  it makes us think about our purchases; about what spending money means for our individual and collective financial well-being.

that's a very good thing.

but you still gotta eat.

If people aren't buying anything with coins (false btw) because they are so sure the value is going up this implies they ought be converting all liquid assets (dolars for example) to BTC asap. So the not buying because I-just-know-it-will-rise is not hurting bitcoin at all.

Bonus thought: If there is a current bitcoin price then someone is spending BTC on something.

I'm not a free market worshipper like many here, but I do hold clear and honest discussion in high esteem. Thus, I'm compelled to ask you two questions:

1. Could you define "market failure"?
2. Why should we want to prevent them?

Price going up is the result of value flowing out of dollars and into bitcoins.  This is what the monetisation of a currency looks like.

It's scary for now, but is inevitable.

It also tells you nothing about hoarding. It tells you bitcoins are in demand by owners of dollars.

I'd like to hear how you think new bitcoin users are going to start using them without buying some first (don't say mining).

1. Increasing value --> More goods/services
2. Prices eventually stabilize, people spend on these goods/services
3. Economy flourishes!

Also, not everyone hoards. Plenty of Bitcoin businesses have successful transactions. Sure, the price spike encourages more hoarding than with a stable price, but it also encourages more goods/services to be created, which is exactly what we need for the economy to expand. If the currency was decreasing in value, we wouldn't have businesses being created and we would go nowhere.

I've been looking a bit into BTC lately, these are my worries besides from what have already been discussed in this thread:

1. Why would anyone want to accept a currency that doesn't ensure "profit" on tomorrows trade rates? Do you have to write terms that says "If BTC drops below blah blah- I am not willing to process your order" because this can ruin EVERYBODY, no one gives their goods for free!

2. "No fees", correct, but any conversion from real-life/fiat currency = fees, any "potentially secure" eWallet, mybitcoin trade (more fees) .. Seems like any use-case suffers from fees in the end (which is not the original intention I guess)

3. Assuming Bitcoin only gets more popular, difficulty and popularity goes up. You still have alot of maintenance by securing your wallet, and this wallet is not able to send less than 0.1 or 1.0 BTC- so why would you consider mining at anytime if anything happens in between you are always giving your effort away when wallets are "lost" .. Even if you have a central pool server, all connected clients have individual "wallets" and who wants to wait for every single client to generate 1BTC and then transfer anything to your "main" wallet .. Maintaining mining and wallets seems like a pain in the ass since it is decentralized, but no one gives you the option to "collaborate" on wallets

4. Are your money protected by any means if you use all your money to invest REAL money in BTC to sell later on for profit when the rate goes up ? I would only trust a company within my own country, I think the police would never take a "BitCoin lost" or "BitCoin stolen" case seriously, especially if located in Japan or Canada (I'm from Europe) .. What if this happened to someone on MtGox or TradeHill? Some users on the forums already got mails from the owner of MtGox saying their money is "locked" because of a potential "stolen bitcoins" case .. No matter what, none of us wish to have "locked money" .. It's more frustrating than anything !!

I might have gotten the whole thing wrong and then excuse me for my total incompetence and lack of leetness, but who actually understood this thing perfect from the start ? Well I guess mtgox.com is one of the only business sites that earn more bitcoins and dollars than anyone else in the bitcoin world. And mtgox owners without a doubt would be able to manipulate BTC currency value ..

Thanks for explaining, well written.

I have thought of this myself, it seems that every time the BTC-value explodes it begins to decrease slightly in value over the next hours.
It is pretty logical since if you notice the value of BTC has raised 50% the latest 24h and you already consider selling, you sell as soon as you think the raise is about the end, which could increase value further. But when everyone who is interested in selling BTC has done their business, the value goes down slightly.

I have a feeling about being totally wrong here... Please correct me or confirm I have a point.
Now that I think of it, this seems wrong... Correction please!

So bitcoin makes you want to produce instead of consume? Sounds awful.