The problem is that bitcoin is now dominated, at least it seems to me, by speculative investment. And that's not what currency is about. People value currency not because it appreciates but because it is stable. Runaway inflation and deflation are both bad for monetary systems, but here we have people imagining that deflation is fan-fucking-tastic for bitcoin.
And that's telling, because it indicates that bitcoin isn't a medium of exchange, it's an investment denominated in dollars. People are talking about the "price" of bitcoin more than anything these days, but that's not why people choose a medium of exchange. Bitcoins shouldn't be exciting, they should be boring, and dependable. As boring and dependable as a dollar bill.
SatoshiDice and the controversy surrounding it has pretty well emphasized that Bitcoin is not going to be as widespread a currency as some of the true believers want it to be. It has a niche use in SR and other semi/illegal things, but it's really useful only as long as the price remains stable (in fact, during highly volatile periods like this, most of the smart SR merchants pack up shop until the BTC-USD rate has stabilized).
However, the blockchain inherently limits BTC from being able to be used in the same way that, say, Paypal is right now, just because of it's inability to deal with a high volume of transactions, not to mention the confirmation time. And efforts to mitigate this through 3rd parties removes the distributed semianonymous merits, thus leading to a position where you're better off just using PayPal or a credit card anyways.
And that's telling, because it indicates that bitcoin isn't a medium of exchange, it's an investment denominated in dollars. People are talking about the "price" of bitcoin more than anything these days, but that's not why people choose a medium of exchange. Bitcoins shouldn't be exciting, they should be boring, and dependable. As boring and dependable as a dollar bill.