+0 I understand the point and I think it is good that people have the option to use Bitcoinica (after all, it's a free market right?). I also think people should be able to use drugs if they wish, but that doesn't mean that people using drugs is good for society. It's good to have the choice, but not necessarily good to exercise that choice to commit to action.
While I don't consider myself a pessimistic person (I actually am one of the greatest optimists you can find), I do not trust the Bitcoin community in general to be careful with a Pandora's Box like Bitcoinica. By careful, I mean responsible -- I don't trust that the majority of people are aware of the potential impact that their individual actions can have on the entire market.
My main problem is that it aids in pure speculation. Bitcoin is treated by most as a gambling opportunity first and an evolved social development second. But, Bitcoin's intended purpose was to be an evolved social development first and a gambling opportunity, well, never (at least it isn't implied in the white paper).
Basically, I'm just saying that the motivation that drives many users into Bitcoin is antithetical to the intended purpose of Bitcoin. Of course, one could argue this by saying that it's in alignment with Bitcoin's intended purpose simply because Bitcoin is used. I think at a certain level this is true, but at a systemic level it is not. All systems require balance to achieve homeostasis, but Bitcoinica really fucks with the balance of systemic input and output. It's a threat to destabilization.
Excessive volatility does cause destabilization, but the level of volatility is stabilized because those that cause it lose. Once they've lost enough money that they learn to not overleverage, they can join the rest of us in sanityland. In the mean time, people who understand this (including outsider observers looking for an easy way to profit off this market) will make lots of money adding stability. The more money there is to be made, the more we will attract the investors necessary to grow this thing to a scale where it could actually be used by a medium sized business like thinkgeek or newegg. Yes, this involves chewing up newbie speculators, but I can say from experience they won't learn not to gamble like that until they take real losses. Either that, or they take enough of a hit that they walk away and fail to capitalize on their experience. That's the saddest part, but we won't build a new economy without being willing to take some risks. So let those that can handle managing risk manage risk. Perhaps a community effort to warn new users Bitcoinica is not a toy is warranted, but such effort can't really be undertaken without dragging out all the trolls who like to scream OMG! Bitcoinica is the spawn of Satan!