Bitcoin breaks $200

That's the only statistic that matters: how much USD-equivalent is being injected into/out of system. That tells you whether they're being hoarded.

In other words, creating another blockchain is easy but convincing enough people that the variant coins are worth something is hard. Very hard.

By comparison maintaining security for paper money requires substantially less energy than attacking paper money, even if you include the energy devoted to fighting theft (the analog of the energy devoted to securing individual Bitcoin wallets). The energy spent on counterfeiting detection is far lower than the energy needed to counterfeit modern paper money, and Chaum showed the world how to create digital cash that is even more secure against counterfeiting, with security against double spending, and that allows for anonymous transactions, while still requiring far less energy to be spent on security than would be needed to attack the system.

So no, there is no hyperbole here. Bitcoin is a very inefficient system. It might work in practice, but that does not make it efficient, nor does it even make it an improvement over what we have now. The only think Bitcoin has going for it is that there is no obvious central authority (I say no obvious central authority because in practice, the Bitcoin developers have as much power over the currency as a central bank -- they can e.g. cause a block chain fork at any time, as they accidentally did a few months ago).

We do not speak of "incentives" in other contexts. When we talk about encryption, we do not spend our time pondering the "incentives" for not attacking our cryptosystems -- we create encryption systems that cannot be feasibly attacked regardless of what motivates the attacker. When we talk about secure multiparty computation, we do not talk about what might motivate the attacker, we only talk about how to prevent attacks.

There are historical counterexamples to the idea that we can analyze a cryptosystem's security in terms of the attacker's "incentives." A famous and well-known example is the German Enigma cipher from WWII. After the war, German cryptographers were captured and interrogated (the TICOM operation), and one of the things they revealed was that they knew that Enigma could be attacked, but did not believe that it would be worth the effort. Even the assumption that the attacker will act rationally is bad -- we should be secure against irrational attackers too.

"We can't know what will happen until it happens"

We can, however, design systems that maintain their security properties regardless of what happens (at least under standard cryptographic hardness assumptions, though sometimes we can even get information theoretic security). ElGamal encryption is secure against any polynomial-time chosen-plaintext attack -- provably so. The GMR signature system is secure against any polynomial-time adaptive chosen-message attack. For a very strange construction that illustrates how we can defend against attack strategies we cannot even imagine, consider this work on non-malleable commitments (the construction is on page 13; it is very strange, but the strangeness is key to the security proof, or in other words there are possible attack methods that nobody is aware of that the construction prevents):

http://eprint.iacr.org/2010/483.pdf

"The field that you want to use to model everything is too narrow for Bitcoin."

Yes, things are very easy when you have no clearly-specified goals, requirements, or constraints. How can there be any technical criticism of Bitcoin if this sort of response is considered valid? Anything anyone says is wrong with Bitcoin could always be dismissed as being "too narrow."

Let's set aside the issue of whether or not the military is needed for the dollar to remain valuable and speak strictly about security here. You have mentioned no less than three security goals:

1. Preventing counterfeiting

2. Enforcing tax payments

3. Preventing theft

Now, let's see what happens with Bitcoin:

1. Counterfeiting is replaced with double spending, and you need at least as much energy to be devoted to fighting this as would be needed for an attack.

2. Bitcoin does nothing to reduce the energy needed to enforce tax payments, it just shifts the goalposts slightly.

3. Wallet theft is a real problem, and Bitcoin itself does nothing to combat it; you still need to devote energy to securing your wallet, no different than depositing money in a bank.

In other words, two of the three security goals that you mentioned are not addressed in any meaningful way by Bitcoin, and the one that is addressed still winds up requiring far more energy than is needed for fiat currency. Even if paper money turns out to be too inefficient, Chaum's research in the 80s and 90s showed the world how to create digital cash that simultaneously allows for anonymous payments, prevents double spending, and requires substantially less work to secure than it does to attack (exponentially so, in fact). The difference, of course, is that Chaum's designs all called for a central bank in the system, which you already need with fiat currency.

"I'd be surprised if the energy required to keep billions of ASICs humming is more than the energy required to keep millions of people humming."

The problem is that the number of ASICs that need to be powered on will increase as the attempts to attack Bitcoin increase, until eventually half the energy output of the planet is being devoted to ASICs. That is not the situation with fiat currency, as noted above.

"Further, the fractional reserve system is far from rock solid. It appears to be solid, until a tipping point of confidence is reached, at which point it falls like a house of cards. It's the definition of a con game."

Except that the "confidence" is not in the banking system, but in the legal system that supports it. Fiat currency's value stems from tax laws, debt laws, torts, and so forth, and when people talk about "confidence in the government" what they really mean is "confidence in the government's ability to enforce the law." If you truly lack such confidence, try this: stop paying your taxes. As long as people believe that failure to pay their taxes will result in losing their property and freedom, people will continue to demand payment with fiat currency -- the only currency they can use to pay their taxes. Likewise with people who have to repay loans (you would be insane to issue a loan in a currency that courts do not deal in), people who have been ordered by courts to make certain payments (again, this will be in whatever currency the courts deal in), people who must pay parking tickets, etc., etc., etc.

The vast majority of businesses that "accept Bitcoin" are actually accepting fiat currency payments, via a service that exchanges Bitcoin for fiat currency, and only because that allows them to accept electronic payments with lower transaction fees compared to the alternatives. That is how pervasive the "house of cards" is.

Can you identify a particular, distinguishing feature of Facebook that accounts for its popularity? You can, but many modern day competitors have most of the same features, plus additional ones. Everything that they do is pretty easy to replicate.

Both Bitcoin and Facebook may be outcompeted some day in the future, but that doesn't make them bubbles.

Until Bitcoin is broken through advances in computing or a solution better than Bitcoin comes along, Bitcoin is the top of the heap for digital cash.

Market manipulation as an insider is impossible, as there are no insiders; manipulation is only possible by attacking infrastructure or accumulating enough BTC.

Future bubbles and crashes are likely, but I predict it's going to continue to bounce back pretty much forever. Only if many major governments began to criminalize it, or if some new somehow "better" cryptocurrency came out, would it be in risk of complete deflation.