What are the major reasons to be bullish on bitcoin right now?
Not sarcasm, totally serious.
I've owned a small amount of bitcoin for a while and have followed the market from a far. This observation is highly anecdotal, but I just haven't seen many signs of serious traction over the last six or nine months (i.e. post a ton of the initial retailers partnering to accept bitcoin, Coinbase raising their monster round, etc.)
Reasons to be bullish on the concept? Bitcoin is a secure public registry backed by a decentralized 300k THash/s computing network (and fast growing). That alone is insanely valuable, and not just as a vector of monetary transactions. It's one building block of our decentralized future.
Reasons to be bullish on the BTC/USD exchange price? That would be pure speculation. BTC seems to be now at low levels enough that it wouldn't be insane to buy some for short-term speculation, but it of course it would still be very risky.
The network is single-purpose and costs real electricity to run. If the mining cost stays above the value of the coins mined for long enough people will start turning off their miners.
The mining self-balances; if enough miners shut off their rigs, the difficulty goes down, and it becomes profitable (or break-even) to mine again. (Mining was heavily over-invested, and it's in the ugly process of rebalancing now.) It's possible that Bitcoin will be relegated to a fringe of techno-libertarians, but it is unlikely that the network will ever disappear.
Also, the network is "single-purpose" in the sense that an ethernet cable is single-purpose: while it only accomplishes one thing, it is a building block that can be leveraged in lots of interesting ways (smart contracts, proof-of-extistence, sidechains, colored coins, etc.)
Wishful thinking. Bitcoin does - at least right now - not solve any interesting problem with the way we currently handle our financial transaction. In consequence there is no incentive to mass adopt Bitcoin which in turn keeps the capitalization low which keeps the price fluctuations high which decreases incentives to adopt Bitcoin even further because now you have to buy Bitcoins for real money, transfer them and sell them quickly in order to protect you against this price fluctuations.
There are lots of reasons to be interested in and somewhat optimistic about cryptocurrency in general. But I think there are enough arguable flaws in Bitcoin's specific implementation that its first mover advantage ultimately won't count for much.
It's all about the roll-out, not the price. The price should naturally follow, and then to imagine scenarios you may not be familiar with, but are still real. Here are a few:
* More efficient inter and intra-organizational business systems. I am unsure of how involved academia and consulting have been with bitcoin and cryptos, but JIT payments seem like a very attractive proposition, especially with trusted partners, and especially in corporate contexts. Does your local bank have an API that allows easy funds transfers? Perhaps bitcoin can simplify the accounting function. There has to be benefits and cost-savings. CEOs may ask the question.. "we can get bitcoins, but then what?"
* As mentioned elsewhere in the thread. Adoption in Africa or some other nation: the Orkut phenomenon. It's not about doubt in the USD (also mentioned in the thread) but rather doubt in one's own currency from inflation (or some other unreliability.) This is Draper's view. I think the key is to combine bitcoin with a fiat note (or some newer crypto down the line) and reduce reliance on banks. That's the sweet spot.
* To avoid bank confiscations, eg Cyprus. Having some money is better than having money that's been largely confiscated. Bitcoin makes any nasties in government and corporations think twice. It's wealth insurance. And if/when confiscations occur, the price could rise higher than what you paid for them (but until then, it might seem like a loss.)
* I suppose bitcoin could become a type of digital backbone currency, due to it being the first (but not the last) Cc. It really depends on the roll out, which has a number of imperatives driving it. It's worth looking at various business and use cases of bitcoins, and once these start reaching larger audiences, the usage should expand.
* Online activities needing anonymity: use your imagination.
* The currency could be faster to use, but it's usable enough for above things.
Personally, I think there's still more (potentially much more) downside in the short-term, but it's hard to catch a falling knife. As an investment vehicle, it's highly speculative and there's still a many existential threats that could cause Bitcoin value could completely collapse (something is fundamentally broken with the protocol that can't be rolled back/forked/or patched, instability/attacks on the mining network that make mining untenable, aggressive governmental illegalization/prosecution of crypto-currencies).
However, I'm pretty bullish about Bitcoin mid-term, and here's why:
* The blockchain is pretty revolutionary technology that allows transactions between untrusted decentralized parties. There's almost no end of interesting decentralized architecture/applications that can be built on it. Blockchains are secured by computation - the Bitcoin network is by far (magnitudes) the most secure network and security (mining difficulty/hashrate) continues to grow[1]. While there are some interesting altcoins being developed (Ethereum is probably the most promising), it seems like Bitcoin will be the best blockchain to use if you have something you want to build anytime soon. There's a lot of interesting developments (side chains, tree chains, etc that will let devs use the network more easily)
* Even comparing to a year ago, the amount of infrastructure: exchanges, wallets, storage, payment processors, ATMs, being built has been staggering. I think w/ the way Coinbase, BitPay, and Circle are working we're just getting to a point where a regular consumer might even consider using the Bitcoin (think the net in '94/'95). There's still a lot of basic infrastructural improvements that need to happen.
* Along with that, I think that cdixon's post on "native Bitcoin apps"[2] is right on. International microfinance (as an extension/evolution of international remittance) and decentralized marketplaces can be do things that have traditionally been too hard/expensive to be worthwhile (again, the parallels to the story of the Internet). These are billion dollar opportunities.
* To some degree, this shuffle of weak hands/speculators/early adopters cashing out is probably a better thing in the long term. You're seeing some big players doing some major market manipulation (this drop was primarily driven by a 30K BTC sell wall) - still, overall volatility continues to decline[3] and Bitcoin's suitability as a transactional instrument is improving. Personally, I consider the early-adopter/"dark matter" coins as one of the most problematic aspects (and existential threats) to Bitcoin. Last year, Risto Pietilä ran some analysis on the leaked Gox data and extrapolated estimates that basically 1-10K people own 50% of all Bitcoins. The day that Satoshi's coins start moving and the sky doesn't fall I'll feel better, but there are enough of these dark matter coins that Bitcoin may never get out from under the threat of extreme manipulation. Once crypto-currency infrastructure gets hammered out, I think there will probably be a mass migration to something that doesn't end up making a handful of crazy people trillionaires, but maybe people won't care (or prices become irrelevant as BTC is used primarily as a payment rail/tx processor; the floor will be based on money velocity and mining cost). I continue to be surprised as I've started following Bitcoin more closely.
So, you probably don't want to put your life savings in, but it's probably worth investing some time at least to pay attention to what's popping out of the crypto-currency world.
Not sarcasm, totally serious.
I've owned a small amount of bitcoin for a while and have followed the market from a far. This observation is highly anecdotal, but I just haven't seen many signs of serious traction over the last six or nine months (i.e. post a ton of the initial retailers partnering to accept bitcoin, Coinbase raising their monster round, etc.)