If Bitcoin is currency, it needs to be thought of in terms of exchange rate, not price.
If more people adopt its use while supply remains relatively constant, then the "price" will increase with demand, not drop. More dollars, or whatever currency you want, is competing for the same number of Bitcoin. Bidding for the limited supply drives the exchange rate. One man will trade $1000 for 1 Bitcoin while someone else bids $1010.
Its utility over fiat money and specie is its low cost of transmission.
Gresham's law dictates that bad government-backed money drives good money out of circulation. Therefore, we are getting people hording Bitcoin like gold, or silver, or wheat pennies, or junk silver coins. Some day my baseball card collection will allow me to retire. Some day.
Bitcoin is volitile. As it gains wide acceptance it will be more widely used.
Many currencies have come and gone. Currency has to be able to widely accepted. Bitcoin is becoming more widely accepted. Beaver hides used to be used as money, and beads, and tobacco because gold and silver were relatively rare. People who had it traded in specie. Those that didn't traded in something else.
The advantage of Bitcoin is it is divisible with out losing its utility, unlike cutting up a beaver hide.
It does not really matter if the dollar continues to drop against Bitcoin. If I want to transmit $1000 now, it will cost one Bitcoin in trade to be sent where it will be traded back for $1000 at the other end. If a $1000 was sent by a bank, the bank fee would be subtracted. If in two weeks a Bitcoin costs $2000, then I get to send half a Bitcoin instead.
If you fear the volatility, don't hold Bitcoin. Don't make long term contracts in Bitcoin. Prices in Bitcoin are rapidly dropping.
Can another digital currency be created to compete with Bitcoin? Yes, but that does not matter. Does the peso compete with the dollar? Did the peso destroy the dollar because it is so much more available? This is all nonsense.
As an investment, is Bitcoin viable? I expect the value will increase with acceptance. Is it in a speculative bubble? Maybe. It really depends on how widely accepted it becomes and remains.
[F]orce can only settle questions of power, not of right. - Clyde N. Wilson
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