What is the point in a currency that ranges from $2 USD to $12 USD in a year ?
What's problematic is when you buy something worth $50 USD with 5 Bitcoins, and the Bitcoin to USD drops before the seller can get their USD from MtGOX (or whoever their Currency Exchange house is).
The upwards volatility isn't a problem in that buyer/seller scenario. If I want to buy something worth $50 USD, and I go purchase 5 bitcoins for $50USD, and then, those bitcoins are worth $55USD by the time the purchase clears, then I only paid $50USD and the Vendor received $55 USD. Everyone comes out a winner.
If BTC is rapidly rising against the dollar, then I'd rather spend dollars because I'll want to keep the BTC in my account in anticipation of further appreciation.
And, for that matter, the fact that the entire conversation is framed this way doesn't bode well for BTC as a currency. People who use a currency as a currency measure its rises and drops in value by comparing what you can buy with a given amount of the currency in the present versus what you could buy with the same amount of that currency in the past. When people measure something's value in terms of some other currency, as is the universal practice for BTC, that indicates they're thinking of it as a commodity for investment or speculation rather than a currency.
If all you know is a week from now it'll cost somewhere between 50 and 500 bitcoins, that's a lot harder to plan around.
"The network never creates more than 50 BTC per block and this amount will decrease over time towards zero, such that no more than 21 million will ever exist. As this payout decreases, the incentive for users to run block-generating nodes is intended to change to earning transaction fees."
Because clearly I wouldn't want to hold anything in Bitcoin for a long period of time due to its instability.
Bitcoin enthusiasts just have too high expectations for it.
While bitcoins can be used for illegal transactions, it does not mean (and never will) that 99% of transactions will be illegal, just like Feds won't shut down knife factory because some knifes were used to kill. At the end, paying for something illegal is not illegal on its own; its the act or good you paying for illegal. So this or another way, in order to sentence someone, Feds will need more proof of a comited crime, than just blunt bitcoins transactions (how about crime itself).
Did you declare all your bitcoin transactions to the IRS? You may already be in trouble...
That doesn't mean it isn't 99% illegal activity, just like e.g. Freenet.
I cargo-culted that explanation, but it sounds good to me.
Money wasn't meant to be saved. Earn and pay your bills in the monetary plane. Save your surplus production in the physical plane.
Kudos to first adopters!