Bubbles occur when a rise in the money supply, combined with speculative enthusiasm, ends up bidding the price well above what the price would otherwise be. During the past 3 months a great deal of money has flooded into Bitcoin in reaction to some positive press and what appears to be a nod from FinCEN. This past week had plenty of exuberant buying, so by that definition of a bubble, the past two weeks in Bitcoin have been a bubble.

But two weeks ago, BTC had just crossed the $100 mark for the first time. A dizzying height for anyone who has been watching bitcoin for more than a few months. I said that at that price I wasn’t sure it was overpriced yet. After the precipitous rise and “crash,” here we are back at $100 again. Maybe the price will go lower. Who can say? But if you were predicting Bitcoin returning to near zero in price, you are so far completely wrong.

I have no idea what the price “should” be but I can tell you I have never paid more than $100 for one.

A “deflationary spiral” just doesn’t happen. In an environment of falling prices, not everyone decides to hide every cent under the mattress forever. Your currency might be appreciating but you still want things. You can observe this in consumer electronics. I know tablets will be better and cheaper next year, but I want a Nexus 10 *now*. So I buy one. Has the deflationary tablet market caused an implosion that halts all tablet production? No. Instead productivity is sky-high and rising. In fact, a deflationary money creates an incentive to only buy things that will last, or things that represent a better return than holding the money. In other words, the market would reward quality, affordability, and long-term value, instead of what we have now where everything is cheaply made and short-lived and purchased on credit.

-alternate reply-

This would imply you could sell a bitcoin and get 9 million dollars for it EVER. It also implies that someone with 1,000 bitcoins could sell them off at the end of this year for 9 billion dollars. If you had even the smallest iota of business sense (or common, for that matter), you’d know that such growth rate is unsustainable and unrealistic. If bitcoin were to reach even 1 million dollars by the end of this year, either something has gone horribly wrong or something is
about to go horribly wrong. There *will* be a crash, and it *will* be nasty. Sure, a handful of people are going to get rich, but unless you have the ticker projected onto your retinas in realtime, it probably won’t be you.

http://i.imgur.com/bVaJKAi.jpg