And speculation is popular because it’s perhaps the easiest way to make profits from Bitcoin. People don’t create money to waste money unless it’s inflationary on purpose. People tend to want to earn, save, and invest. Bitcoin allows people to earn, save, and invest, but the reason why people don’t like to spend is because it’s very hard to earn.
People do like to save, invest and speculate. The point is if I own any Bitcoins I’m not going to spend it on a Pizza which once I eat it those Bitcoins are gone forever and I can never get them back? No I’m instead going to invest my Bitcoins to either help me make more Bitcoins in the future or to protect whatever Bitcoins I already have. I would seek to increase my income in Bitcoins and decrease costs. I would seek to maximize my profits. Once I have enough income and profits that I know I’ll always have some Bitcoins to play with that is when I’ll start to spend.
The point is not to ever spend them down. It makes no rational sense to spend your life savings down, but it makes all the sense in the world to spend up or spend across. Luxury Bitcoins is not something most people have right now but that will change when the value of Bitcoins go up in relation to USD and the income sources for Bitcoins increase.
Once I can earn Bitcoins fairly easily and I know the value is over $1000 a coin it becomes a different story and at $10,000 a coin even more likely to spend. The point is people are more likely to spend also when the value of a Bitcoin in reality matches the value they have set for it in their mind. People who believe each Bitcoin is worth $100,000 aren’t going to spend until they are worth that much and this is okay because our willingness to spend is what decides how much they are worth. So maybe we shouldn’t spend them for a while.
a) When I can earn Bitcoins I will be more likely to spend them. Dollars as inflationary but I’m not likely to spend the last dollar in my pocket on something I don’t actually need. Bitcoins are inflationary but I’m not likely to spend my last Bitcoin on something I don’t really need. It’s currently very hard to earn a significant amount of Bitcoins so no one is ready to spend them and at the same time there aren’t many places to spend them either. So while the deflation is good we need to be able to replace every Bitcoin we spent to make it spendable like a currency. When I can spend X amount a week based on an income of Y amount a week then why not spend Bitcoins in that scenario? I don’t lose any Bitcoins so there is no reason not to spend my profits. I’m not however going to spend my savings and who exactly would?
b) Volatility isn’t a problem. Bitspend and Bitpay can handle it. Better designed payment processors can handle it. Better designed exchanges can handle it. But for now volatility means increased profits for speculators and right now speculation is one of the only ways to turn 1 BTC into 2 BTC. So if that is the best source of income in the Bitcoin economy it’s going to create a natural incentive to pump and dump which drives volatility up.
c) Bitcoin does not have to replace the dollar to be a success it merely has to coexist. Alternative cryptocurrencies don’t have to replace Bitcoin but merely compete. Bitcoin is like the first web browser when no one knows how the web works but experts from other fields expect it to work like something else. Bitcoin is unique and we cannot base how it works around fiat currency, gold or anything else.