What you say sounds lovely, but I still see it as a bunch of people dumping money into bitcoin and a bunch of other people cashing out for profit.
You're observing it correctly, but you're using derogatory terminology which distracts you.
When people "dump money in"... what you mean is they are trading one currency for another, and increasing the price of BTC relative to USD. A portion of those USD then get used to build the bitcoin systems that you think we should all be using. When they "cash out for profit" they are again trading in reverse - but the key is that they are doing that reverse trade sometime in the future. This is what I mean when I say that speculators bring the value (and wealth) of the potential bitcoin economy from the future into the present. You're ignoring the dimension of time. Speculators rush in to this opportunity, price soars, those holding BTC can sell a portion of them at higher prices, and with this newfound wealth they can build the systems they struggle to build.
You think that people should only spend Bitcoin, never USD... but let's examine that.
Suppose for a minute that it was impossible to exchange BTC for USD. Would the Bitcoin economy grow faster? No. It would be seriously hamstrung - the market suffocated of vast amounts of potential trade. Those holding BTC could spend them only on a very narrow range of goods and services. Fine, I want wool socks, but not alpaca wool - I want sheep wool. Ooops too bad, no sheep wool sock merchant yet accepts bitcoin. And why would he? For he in turn would only be able to spend his revenue on a supremely narrow range of goods and services.
Without the ability to exchange BTC for USD, one's BTC would only be as valuable as that which could directly be purchased with BTC. But WITH the ability to exchange for USD, the BTC is able to gain tremendous value - with two degrees of exchange I can buy anything in the world with Bitcoin. Without a link to dollars, that's impossible. Thank goodness we're able to trade it for more universally accepted forms of money, else Bitcoin would be limited by the merchants who wanted Bitcoin at time=0... and who the hell would want Bitcoin at time=0 when it can only be spent on goods/services existing at time=0? Only the most foolish of merchants would ever accept such a thing, and in turn consumers would only be able to purchase a narrow range of goods from the most foolish of merchants.
Underlying this is the same reason it's silly when people suggest we move to a "barter" economy. Why produce concrete pilings when you can only trade them with people who directly want concrete pilings? USD let's the concrete piling maker sell for the currency, then trade the currency with anyone. Similarly, USD let's the Bitcoin maker sell for the currency, then trade the currency with anyone - making Bitcoin immeasurably more marketable. The extent of the market is vastly increased when one can exchange Bitcoin with those goods most widely desired around the world - specifcally, those goods called national currencies. (side note: in reality we DO live in a barter economy, it's just that people choose to barter primarily with the good called USD, which we call money because it's so universally bartered with)
I've had lots of coffee so let's examine it from another perspective...
At time=0, Bitcoins had zero market price. I submit to you that the first person to risk something of real value (say, USD - which has real value because it can purchase things) on Bitcoins was the ultimate speculator, and according to your premise, he was a bad person who was bad for Bitcoin's development. If he had risked a good (like a loaf of bread) then you seem to say that's okay, but that doesn't make him any less of a speculator, because a loaf of bread is worth $3 USD... thus either way he's trading something worth $3 USD for the Bitcoins because he believes the Bitcoins to be more valuable than $3. He either trades $3 directly, or a $3 loaf of bread indirectly. You seem to think the former is wrong and destructive, and the latter valid and constructive. Nonsense. Both are valid and constructive.
Now, why he risked his real value USD, or his real value bread loaf, for zero-value BTC should be irrelevant to us, but he did it because he believed Bitcoins were underpriced at $0 each and was willing to bid $3 worth of currency or of bread. After his purchase, at time=1, that quantity of Bitcoins has a market value now equal to $3 - whether that's priced in terms of $3 USD or a loaf of bread that in turn is priced at $3 USD, the effect is the same. All the holders of coins can now better estimate the value of their holdings. They are made wealthier - their purchasing power increased - and can now more easily trade their BTC for goods that they need. They know that a certain amount of BTC is equal to $3 worth of bread which is equal to $3 USD. The next bidder can raise or lower his bread or USD bid, and from this progression we get a market price for Bitcoin. The
reason someone places that bid is irrelevant - he's made a judgement and you can agree or disagree, and from these collective judgments a marketplace spontaneously emerges. Bitcoin sellers, Bread sellers, and USD sellers - all thinking and bidding based on their own demand curve, time preferences, and predictions for the future.
Whether the speculator does any of this trade to "help bitcoin" or to "help himself" is again irrelevant. What we care about is the
effect of his action, not his motivation. The effect is demonstrably positive - it is to "bid" on a bitcoin, whether with USD or Bread, giving other market participants a precedent to in turn base their own bids from. A market price emerges- and you ought not care whether that price is $3-worth of bread or $3-worth of USD. Importantly, subsequent speculators after this first guy are no less useful, no matter their motivation, and no matter whether they bid with USD or with Bread.
Time for a sandwhich... which I'd be unable to buy for BTC but which I was in fact able to buy by trading BTC -> USD -> sandwhich ingredients. Some day, a merchant will decide to sell a sandwich directly for BTC, but only because the above process was able to take place.
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