Currency clearly derives it value from a variety of sources, all stemming from beliefs held by people. Bitcoin as it stands right now derives the majority of its value from people holding that belief that its value will continue to rise - that is it is driven heavily by speculation.
Most countries will jealously guard their currencies in foreign exchange markets specifically to reduce the effect of speculation on the value of their currency because they want their currency not to act as a method for people to get rich, but to facilitate economic activity within their own country. You can obviously see why speculation driven volatility (or this freakish deflation that Bitcoin has right now) can be bad for actually using the currency as a medium of exchange. This is especially true since most services that accept Bitcoin right now still interface heavily with other currency to deal with their suppliers and such.
It's obviously knee-jerk to say that Bitcoin has no intrinsic value. Currencies do not require intrinsic value beyond people being fairly certain that other people will accept the currency as payment. This is why American dollars, gold, copper, bullets, alcohol, and seashells can all be used as effective currency given the right situation.
The flip side is that it should also be obvious that the current value of Bitcoin is pretty much divorced from its value as a medium of exchange as its clearly fueled by speculation right now. When people stop believing that they can buy 1 BTC now and sell a few days later for 20% increase of US dollars, and start believing that they can buy 1 BTC now and that they can hang on to it for a few days or a few years and that it'll be roughly equally useful over that time-frame, that will be when the "value" of Bitcoin is set.