Since no one knows what the heck bitcoins are worth, I think speculation is actually the most important activity for bitcoin right now as we go through the slow process of price discovery. Once a price range is settled on, THEN commerce can start.
I couldnt disagree more. If you see bitcoin as a currency, like I do, its only reason to exist is to allow trade; and if there is no commerce associated with it, it has no value. All speculation does is anticipate on future economic activity that may or may not happen, and in this case, the speculation itself is preventing the economic activity from happening. That will never stabilize, its inherently unstable.
Assume it stays around $3 for a few months now, and merchants start to believe in its stability and start adopting it. What do you think will happen? As BTC adoption finally begins, its price will skyrocket, a bubble will inflate, merchants will get second thoughts, the bubble bursts and we are back at square one.
i said i agree with you that in an ideal world a currency should be rock steady with no fluctuation in value. but that has to be some positive number thats above zero. but because that number is above zero, how does the market determine what that specific number is?
i submit that if Bitcoin becomes successful it will stabilize at some number reflective of its useful value as a currency. b/c its so young, the market is trying, wildly, to determine what that number is. my opinion, and its just my opinion based on what i know of the technology, is that its way above its current number. nevermind the volatility which is
expected at this nascent stage.
edit: btw, we don't live in an ideal world. we live in a world with the corrupt Fed injecting USD's into the system everytime their buddies get into trouble. this is in part why we have volatility.