Despite a lot of VC money pouring into BTC startups, there just doesn't seem to be any traction. My guess is that Mt. Gox irrevocably destroyed faith in the system for the "common user", because even the biggest exchange couldn't bother with hiring some security people (well, at least bitstamp seemed like that, what exactly happened at Mt. Gox is still a mystery to me).
It isn't stable enough for that. The price has moved +30% within a few hours [1]. That's easily short enough to cause problems for both merchants and consumers. For consumers, they risk the bitcoin price falling after they've purchased bitcoins, but before they've purchased something with them. And even if you succeed in buying something with your bitcoins before the price has gone up in bitcoin terms, the store owner might lose if he doesn't cash out the bitcoins he has earned before the price falls.
There are plenty of risks to non-speculators. But in fact, the speculators, by providing liquidity, help the non-speculators enter and exit a bitcoin position quickly and with minimal losses (tight spread). Were it not for the speculators, services like Bitpay couldn't exist. Speculators continuously incur risk holding bitcoins, and market makers literally take on the risk of holding bitcoins, transferring this risk away from the consumer and merchant (who can quickly enter and exit the bitcoin market because there are constantly people willing to sell and buy bitcoins (among them market makers and price speculators)).
TL;DR: Have you thanked your local speculator lately?
Currently the only reasonable way to deal with this issue is to pay through an exchange (where they can validate internally), which isn't in itself a problem, but then it won't be anonymous (unless your exchange is participating in money laundering, they are legally obliged to verify your identity)
I think journalists are finally understanding that a big decline in Bitcoin's price is far from a sign of its "death" (since it always survives these drops), and is not even a shocking news anymore. That's why they don't write about it that much.
By pre-Mt. Gox," I of course mean "pre-manipulation."
That's my working theory. If true, the fact that bitcoin has slowly been resetting to pre-manipulated levels would be the first example of the market ever being rational that I'm aware of. (Besides, you know, the fact that insider manipulation of the market was successful in increasing the price, which is rational by definition. Just not in an open happy way that people normally associate with the phrase "market rationality.")
But there are all kinds of problems with that theory. It's something so simple that you want to believe it's true. There's no reason why someone else wouldn't also be trying to manipulate the market now, like BTC-e. There's a financial incentive to try to pump up the price, so why is it continuing to fall, or rather why are current attempts at manipulation failing? Could it really be true that Mt. Gox was the only manipulator ever to have had a significant effect on the price? Seems unlikely.
Maybe the true explanation is that there was all this pent-up unknown hype for bitcoin, which Karpeles' manipulation unleashed on the world like a crack that broke a dam, either to his joy at skyrocking the price or his shock and horror at skyrocking the price, and now everyone's resetting back to pre-hype levels.
I still think bitcoin has value. Even after being used and abused, and dragged through a meatgrinder that shred away every ounce of my bitcoin fanboyism. There is true value there, and that is its ability to get money from you to me in seconds, and then my ability to sell those coins on an exchange for fiat that's deposited into my bank account within just a couple days. In that scenario, it doesn't even matter what bitcoin's current price is. All that matters is that the exchange honors the agreement at the time the coins were sold, because the flow is that the coins go from you to me to being sold on an exchange/middleman within a few minutes. So the current price of bitcoin is whatever it is, and I'm still paid however much I was expecting from you.
And it seems like a solid upward trajectory could even be built on that foundation.
But it's going to take patience and time.
Maybe Mt. Gox's initial manipulation caused the price to curl upwards just enough to entice everyone else to jump onto the bandwagon back in August of 2013, but the manipulation probably wasn't the reason for the surge to $1,100. That was probably herd dynamics, like you said.
(To be clear, there's some pretty hard evidence that Mt. Gox was manipulating the market, so if you're asking whether any manipulation ever occurred, it seems pretty clear it did: https://willyreport.wordpress.com/2014/05/25/the-willy-repor...)
This article makes the point that the large round number trades could simply be large round number trades:
http://hackingdistributed.com/2014/05/27/mtgox-willy-markus/
A key statement: Slow, structured buys are designed to avoid, not cause, jumps in prices.
Note, I'm not defending Mt. Gox, just pushing back against a quick conclusion about what they did.
Again, my argument is "Be careful in ascribing moves in the price of bitcoin to the intentional acts of Mark Karpeles.", I'm not defending Karpeles or Mt Gox.
(I know you're not defending anyone, and I really appreciate having a good debate partner. Certainly not looking for an echo chamber. Just wondering how the simplest explanation isn't the best, in the absence of evidence.)
https://blockchain.info/charts/n-transactions-excluding-chai...
Honestly, whenever I look at these long-term growth charts, I'm sort of surprised there isn't more speculative pressure.
Assuming there was any faith in the system for the common user to begin with.