It is indeed basic supply and demand. Bitcoin is intrinsically a deflationary currency since its supply is fixed at 21 million. Does that mean its price will go up in the future? Only if demand continues to grow to outpace supply, and that's not a given.

Bitcoin has been around for a few years and it hasn't yet proven itself valuable enough for consumers. Merchants are incentivized to adopt it due to the low fees and no chargebacks, but what does the "average Joe" benefit from, as compared to traditional fiat money? Not much.

In fact, since its existence, bitcoin has been used extensively for speculation, gambling, drugs, and pornography because it provides much added value in those fields: instant and anonymous transactions, low fees, etc. But the value of a currency is only as good as its usability in trade/commerce, and instant and anonymous transactions don't add much value in the world of (traditional) e-commerce.

A more creative model must be found for bitcoins in e-commerce, and until then, bitcoin's value will be based on pure speculation and will keep the "average Joe"s out. Indeed, why would the "average Joe" go through the trouble of adopting a currency that's based on Cryptographic Hash Functions (??), Proof of Work (??), and Public/Private Keys (??)? These terms are not very accessible to the non-analytical mind.