I've been thinking about why people use Bitcoin a bit lately and its long-term potential. It used to be touted as an alternative to fiat currency, and in fact, the future of currency. Now it seems that people are talking about Bitcoin more as a store of value - a place to keep your money safe that is not a bank or an institution. I know a lot of us invest in Bitcoin more for the perceived increase in value; basically, a lot of us want to get rich.
Here's my question: Would you still continue to move your fiat currency to Bitcoin if it topped out at around USD$5000 and you KNEW it would not go higher, but you also KNEW it would not dip in value? Maybe we could assume it would rise with inflation. If this were the case would you be more or less likely to move your money to Bitcoin?
The major reason many users and merchants are staying away from Bitcoin is volatility. Limited supply, speculative demand, volatility and this instability is the reason why investors and speculators prefer Bitcoin. But Bitcoins utility as a speculative asset has limitations compared to its usage as a medium of exchange.
Since it is always hard to have a equilibrium between supply and demand in Bitcoin, it would always be a bit volatile, but it has to stabilize to the point where it is beneficial to use it both as a speculative asset and a reliable medium of exchange.
So would people use Bitcoins if it was less volatile and more stable. Definitely, usage might increase.