It highlights many of the risks and benefits but misses out on what I think is the Achilles' heel of bitcoin, the ability for sovereigns to shut down the exchanges.
Without the ability to convert bitcoin to fiat easily, the currency loses its usefulness as a proxy for fiat currency. Does anyone have a convincing argument for how the exchanges are not vulnerable?
Definition 1: 'Good producer' is a producer that accepts bitcoins.
Definition 2: If all the good producers together produce all that you need, then the number of producers is 'enough'.
Definition 3: 'Ideal state' is when enough good producers exist.
Theorem 1: A producer will accept bitcoins if either of the following is true: i. Ideal state has been attained. ii. There exists exchanges that trade you physical currency against bitcoins.
Observation: Once we are in the ideal state, we no longer need to have bitcoins converted to physical currency. So we don't need the exchanges to exist forever. We need exchanges only till enough producers have started accepting bitcoins.
The great thing about good currencies is they can be exchanged for almost any currency and therefor can be used to purchase almost any good or service that is for sale.
At this point, a full-scale governmental assault on BitCoin could slow it down or scare some people away, but it's highly doubtful that the growth could be stopped altogether. The bigger danger is that they'll embrace it wholesale and start taxing BTC exorbitantly instead. :P
Do you care if you are paid in Chinese Yuan or USD? The currencies are interchangeable, but Yuan is very hard to convert it USD and you'll lose a lot when you do.
Regardless of how big bitcoin gets, everything will not be transacted in bitcoin. People try to accumulate capital to buy big things, like cars and houses. If you can't buy a beach house in Costa Rica - and any beach house, not just from a few sellers - then the currency is less valuable and people will prefer fiat currencies.
Bitcoin must be easily exchangeable to be widely adopted.