[brown9-2]

But what about the people that want to use it as a currency, to buy things? If everyone views it as an investment, and not a vehicle for trade, it will fail as a currency / never take off as a currency.

A lot of this logic is circular - the value will continue to rise because people will keep investing because the value will keep rising, etc.

[Amincd]

People are not all going to hold on to it and not spend. Some people are going to feel that due to hoarding, it won't become a currency, and hence it's not a good investment, and will be more likely to spend.

[jonnathanson]

"...due to hoarding, it won't become a currency, and hence it's not a good investment..."

Not necessarily.

The prospect that it's not a currency is what makes it attractive to hoarders. Hoarders/investors don't want Bitcoin to be a viable currency; they want it to be an investment commodity. And that's the crucial problem with Bitcoin: its use as a currency, and its use as an investment, are fundamentally at odds with one another. At any given time, it makes sense to be either buying/selling (hoarding) or buying/spending (transacting); at no point in time does it make sense to be doing both.

Transactors essentially believe that the value of Bitcoins will converge around a stable mean, thereby facilitating the currency's use for transactions. Hoarders believe the opposite: that the value will either be totally volatile (with lots of peaks and valleys against which to speculate), or that it will steadily climb.

Finally, we should distinguish between "selling" and "spending." A hoarder who wants out of the market will not spend his hoard; he'll sell it. A transactor also buys and "sells" Bitcoins, but in his case, "selling" involves spending them on goods or services -- not converting them back to dollars. This is a subtle, but crucial distinction. Both users buy into the market, but they exit the market differently and with different outcomes. And both will only be able to exit the market if there's liquidity in the form of willing new buyers or willing acceptors of BTC in exchange for goods and services. Each of those two outlets has a different liquidity dynamic, too.

(Sorry for the tl;dr)

[Amincd]

"The prospect that it's not a currency is what makes it attractive to hoarders. Hoarders/investors don't want Bitcoin to be a viable currency; they want it to be an investment commodity. "

Bitcoin will not be a good investment unless it's a currency. It has no other uses besides as currency. It's not a precious metal with industrial or ornamental uses for example. It's an abstract piece of data that could be useful in trade.

" Both users buy into the market, but they exit the market differently and with different outcomes. And both will only be able to exit the market if there's liquidity in the form of willing new buyers or willing acceptors of BTC in exchange for goods and services. Each of those two outlets has a different liquidity dynamic, too."

An investor who believes bitcoins will drop in value has the option of selling it or trading it for a good/service. Both accomplish the goal of getting out of a depreciating asset.

[brown9-2]

Some people are going to feel that due to hoarding, it won't become a currency, and hence it's not a good investment, and will be more likely to spend.

But if I as an individual consumer feel that bitcoin won't become a currency, why would I even be converting my money into bitcoin in the first place?