Pulverizing the dead horse: it will hold value like gold, but its infinite divisibility and ease of transport make it more like an evolved currency.
The big non-True Believer users thus far have largely been either illegal materials, or ultra-high-margin things (reddit gold, Humble Indie Bundle etc).
The problem with deflationary currencies is that there is a huge behavioral difference between currency having 1% annual deflation and 1% annual inflation - it greatly slows the money velocity, as people are not motivated to spend it or invest it in means of production, so there's less of demand for goods/services causing less income for everyone and even more less demand in a reinforcing feedback loop.
It is widely considered that a low rate of inflation brings a very significant positive impact on prosperity compared to a deflationary environment or a very high-inflation one.
If bitcoin is growing in value, and is expected to grow in value in the mid-future, then that is a disincentive to spend it -> then that means a disincentive to sell stuff or provide services for bitcoins (because buyers don't want to use it) -> then that means that it has lower liquidity and usability. In the extreme, 'everybody saves bitcoin, nobody buys pizzas with bitcoin' turns into 'the only way to get rid of bitcoin is to find someone else who wants to hold it for no good reason, but wants to pay you a lot'. A healthy currency, on the other hand, gets used to buy pizzas and services primarily, and gains value because of it's utility in buying stuff.
I suspect that once we do reach the top, we'll discover that bitcoin deflates rather predictably and boringly. So much so that it will make the interest rate in your bank's savings account look interesting. You'll still want to invest for the same reasons you want to invest right now--greater returns.
I just don't see the doom and gloom here. Maybe if Bitcoin was the primary currency in use. But it's not, and I don't think it's in danger of becoming so anytime soon.
What remains to be seen, everything he said it well known economics.
> we're not going to notice any deflationary issues with the currency.
You're already seeing it. Who wants to spend a currency that keeps increasing in value... that _is deflation_.
> I suspect that once we do reach the top, we'll discover that bitcoin deflates rather predictably and boringly.
I don't think you understand deflation.
> I just don't see the doom and gloom here.
Because you don't appear to grok deflation. When the demand for a currency spikes, as bitcoin is now, and the supply is unable to increase to handle that demand, deflation occurs and the price of the currency sky-rockets. Deflation isn't just about the size of the money supply, it's about the size of the demand of the market in relation to the size of the money supply and if a currency can't expand supply to meet that demand then it'll deflate to meet it and that makes it a terrible currency because it punishes spending and rewards saving, exactly the opposite traits of a good medium of exchange.
USD <-> BTC Trade Volume is spiking, while BTC Transaction is staying the same.
If you believe that BTC is experiencing "rapid growth", can you post some statistics that back your claims? Currently, the charts I'm watching indicate that the only "growth" BTC has right now, is USD <-> BTC exchange volume... which indicates increased speculation.
It also hits credit hard, because lending money is less attractive as you say, but also because taking on credit becomes a riskier proposition; your debt grows even if you pay the interest and some of the capital! It's extremely difficult to see how a modern capitalist economy could function under these constraints.