OK - I can't stand it anymore. I have to let you guys know why I think bitcoin price increases are just getting started. I think my logic is best described in this IM conversation I had with my best friend:
Friend: So what is the economic reasoning why this stuff should become super-valuable?
Me: Well, there's this: http://www.google.com/search?tbm=isch&q=drug+money
Me: That will probably always be a big part of it, because it has all the advantages of cash plus a lot more
Me: The main reason though, which I haven't told anybody except my wife, and that only briefly, is that it is the perfect commodity for trading stocks, bonds, commodities, options, etc.
Me: It won't be legal, but I guarantee it will happen
Me: There are TRILLIONS of dollars in those markets
Me: But only 21 million bitcoins
Me: You get some percentage of that moving to bitcoins, and the math is easy
Me: Plus, of those 21 million bitcoins, most of them aren't for sale
Me: So if billions of dollars of ANYTHING moves into bitcoins, their value will be much, much more than billions of dollars
Me: Depending on how you do the math, you can come up with some pretty absurd future values
Friend: Why would someone start trading in stocks/bonds/com mod,
Friend: In a currency that may magor-inflate?
Me: Well, there are some trades you just can't make right now.
Me: For instance, there are no futures or options for many smaller stocks
Me: Remember when I was interested in penny stocks? One of the biggest problems with trading them is that there are never enough short-borrows available, so even though you KNOW a stock is going to crash, you can't profit from it
Me: Also, there is always insider trading. That's why this stuff won't be legal
Me: I know my stock is going to crash because I spent all the money on hookers and blow, so I short it on the bitcoin black market
Me: Completely untraceable insider trading profits
Me: I'm confident that billions of dollars are going to move into digital currencies like bitcoin. The main risk I see is that a different digital currency will take it's place. That would make bitcoins much less valuable, if not worthless
Me: Bitcoin price instability is one of the biggest reasons this sort of thing will be hard to do, but there is a solution for that as well
Me: You can "short" bitcoin to equal the amount of bitcoins you are holding, so that you are neutral to any bitcoin price swings. You can do something like that with only a small amount of bitcoins using options
Note for posterity: current bitcoin price is in the $5-$6 range after a big run-up.
I think it is appropriate that this is my hundredth post
Edit: Since this thread is now my signature, I want to include my official bitcoin predictions I made in another thread before starting this one:
I'm going to step out on a limb and make some predictions about bitcoin price increases:
1) A lot of kids with graphics cards are going to get a LOT of spending money just because they saved the few bitcoins they mined after reading about it in a forum somewhere
2) The term "bitcoin billionaire" is going to become somewhat commonplace, and will refer to someone who became a billionaire through bitcoin investment.
3) The world's first trillionaire (by USD valuation) will be one of the first big investors in bitcoins.
4) This will all happen WITHOUT the collapse of the US dollar, and without bitcoins becoming a commonplace way to pay at the grocery store.
I guess we'll see if I'm right.
Edit 8/11/2011: My proposal for "the ticker and the hole" is quite possibly the way this will happen: https://bitcointalk.org/index.php?topic=36453.0
Edit 4/2/2013: I now have much more sophisticated ideas about how bitcoin will achieve stability (see my signature). Bitcoin cleared $100 yesterday, and I'm reviving this thread in which in 2011 I predicted wild growth ahead before even the first bitcoin bubble. Note that the arguments above are no less valid today!