BTC aren't quite tulips, but the criticism is well founded that it isn't yet a good currency. A perfect currency would possess the following qualities:
Perfectly Fungible
Perfect Liquidity
Perfect Stability
Right now bitcoins are commodities. Any bitcoin is equally valuable as any other bitcoin; bitcoin's value derives from its purchasing power and from its exchange rate to other mediums of exchange. It has great liquidity and fungibility. However it has inherent stability problems as well as ambient ones:
Currently it experiences volatility by virtue of transactions not being demoninated in BTC, and of its exchange rate to other mediums of exchange. A large part of this is because it is consistently attracting large pools of people who wish to acquire it. The recent price spike appears to be a consequence of Chinese interest in acquiring bitcoin rapidly increasing. Eventually the number of people who want to possess bitcoins will grow as a function of the population on the planet, rather than as a function of new groups of people deciding it has become appealing. This will introduce some stability.
However, there's a fundamental flaw in that the pool of bitcoins is fixed, and that possessors know the finite size of the pool of bitcoins a priori. This exerts deflationary pressure on BTC, and as others have noted, discourages its spending. BTC is vastly more liquid than gold is, for example, but the stability of its value will always be an impediment to its usefulness as a currency.
This doesn't spell the doom of Bitcoin; it doesn't need to be a perfect currency, just a better currency than other currencies. It is already the most liquid commodity on the planet. It is at least as fungible as USD; attempts by coinvalidation to ruin this notwithstanding. Should the deflationary pressure of bitcoin compared to its circulation become sufficiently small, it will have inherent qualities to make it the best currency available, which can lead to it becoming more widespread.
A currency with lower transaction costs in time, and which has growth characteristics which trend toward following the value of productive output of the human race will certainly be better. USD are inherently worse.
Perfectly Fungible
Perfect Liquidity
Perfect Stability
Right now bitcoins are commodities. Any bitcoin is equally valuable as any other bitcoin; bitcoin's value derives from its purchasing power and from its exchange rate to other mediums of exchange. It has great liquidity and fungibility. However it has inherent stability problems as well as ambient ones:
Currently it experiences volatility by virtue of transactions not being demoninated in BTC, and of its exchange rate to other mediums of exchange. A large part of this is because it is consistently attracting large pools of people who wish to acquire it. The recent price spike appears to be a consequence of Chinese interest in acquiring bitcoin rapidly increasing. Eventually the number of people who want to possess bitcoins will grow as a function of the population on the planet, rather than as a function of new groups of people deciding it has become appealing. This will introduce some stability.
However, there's a fundamental flaw in that the pool of bitcoins is fixed, and that possessors know the finite size of the pool of bitcoins a priori. This exerts deflationary pressure on BTC, and as others have noted, discourages its spending. BTC is vastly more liquid than gold is, for example, but the stability of its value will always be an impediment to its usefulness as a currency.
This doesn't spell the doom of Bitcoin; it doesn't need to be a perfect currency, just a better currency than other currencies. It is already the most liquid commodity on the planet. It is at least as fungible as USD; attempts by coinvalidation to ruin this notwithstanding. Should the deflationary pressure of bitcoin compared to its circulation become sufficiently small, it will have inherent qualities to make it the best currency available, which can lead to it becoming more widespread.
A currency with lower transaction costs in time, and which has growth characteristics which trend toward following the value of productive output of the human race will certainly be better. USD are inherently worse.