more price will go up, the more merchants will start accepting bitcoins. No merchant likes a falling currency. So it's better if people hold or buy.
i agree that increasing price will attract more merchants but i don't think that price has that big of an influence on the acceptance since they are not holding the coin and exchanging it to fiat right after they have received the payment in bitcoin.
But the price will increase only and only if the adoption level goes high and at present I dont think that adoption level is upto the mark as many of the countries are not aware about the bitcoin so the adoption of bicoin is far away at a moment and if it happens then thats the good news for the bitcoin community.