What gives Bitcoin its value? Its utility, transaction cost and independence from the current establishment.

Supply and demand? No, that controls price.

Surely, as more merchants accept Bitcoin, more bitcoin gets sold for $$ driving the price down. The lower the price, the more people will panic and sell their BTC or trade it for goods, thus reinforcing the cycle. If that were true all economies would fail. In order for people to spend Bitcoin at merchants they need to come from somewhere. People purchase btc with fiat, spend them at merchants, the merchant exchanges for fiat. The only variable skewing this cycle are miners creating new coins. Current mining revenue is about 1/60 of current USD transaction volume.

I am getting to the point now where I am so tempted to sell my own BTC. I don't normally waver on things like this, I believed Bitcoin had a bright future, but my belief is shaken now. It's an investment not a religion. If you don't have enough extra money for a risky investment then you should definitely sell.

I can't see anything in the near future that will increase the demand side of the equation....
I can't see the future at all. If you learn how to start doing that please let me know. There's a few stocks I have had my eye on...