I made a post about 6 months ago that attempted to explain what I saw happening in the Bitcoin world here:
https://bitcointalk.org/index.php?topic=53949.40I forecasted pretty steady growth, which we've mostly seen. But there are a number of other factors that have arisen since that time.
Bitcoin is getting more secureOne, the fact that more and more FPGAs are being purchased and that ASIC is being talked about means that a government or large financial institution 51% attack on the Bitcoin network is going to get significantly more difficult to implement. The value being put in to prevent such an attack actually increases the value of a Bitcoin itself. At some point it will be widely recognized that it is impossible for any single entity to establish a 51% attack on the network.
Once that happens, the value of a Bitcoin will be based directly on its
inherent function as: a medium of exchange, a unit of account (divisible and fungible), a store of value, a standard of deferred payment, and a measure of value.
Right now there is still some question as to whether or not one institution or individual will attempt to "corner the market" on mined coin, thus making all of the above significantly more difficult to assess with regards to Bitcoin, however it is getting
less likely ever day. I imagine that continued security over time means demand has been increasing for Bitcoin slightly faster than the 7200/day rate at which they are being added to the network.
Mining is becoming a more mature businessSupply might also be tightening as more miners are factoring in December's reward-halving into their return on investment (ROI), meaning they are far less willing to sell at lower prices. Coupled with the increased security and other options for spending coin within the network as opposed to simply "cashing out", more miners are seeing the benefits of delaying a sale right now. At some point the bulk of their stored coin may get sold en masse, though, and we could *could* potentially see the price head back down. There have also been some slightly delays will selling coin via the largest exchange, so some miners have chosen other exchanges or alternative methods.
More options for keeping Bitcoins within the network now existGLBSE is a great example of a Bitcoin "sink" to a certain extent. While many people who obtain dividends from companies listed on GLBSE are choosing to sell their coin, many simply considered those investments a sunk cost and simply reinvest, thus keeping the money within the network. While the operator of a mining company does have to purchase hardware, and thus has to sell the coin, they are doing so in a much more delayed manner than previously, and their shareholders may not be approving them to spend coin as readily.
There are simply more people playing the gameEvery new business or Bitcoin user also becomes a Bitcoin "sink" as they probably want to hold or have some coin on hand at all times relative to their interest. Many of them may sell immediately to pay off USD-denominated debt, but with banking and lending institutions now handling some of this within Bitcoin, others may need to buy in order to fulfill obligations. As interest increases, more and more of these users are active and more and more want to hold or have coin on hand.
I guess we'll see over time if increases remain steady, but I suspect to continue to see it do so as more and more people use it more and more regularly.
