I dont know if bitcoins will ever stabilize or go down to zero but I also believe that no one can be so sure about how a free market is going to behave to just write it off at this moment.
The words "free market" are not a talisman that dispels common sense. Currencies are fundamentally backed by trust. Trust in the US Dollar is based on the status quo (the Nash equilibria of our adoption of the currency, &c), the degree to which our interests are aligned with those of the government (not 100%, not 0%) and the basic economics of taxation that is dollar denominated, a gigantic federal payroll that is dollar denominated, and the fact that the federal government --- the world's largest buyer of everything --- conducts all its business in dollars.
Bitcoin has none of this; it appears to substitute the moral equivalent of a Yahoo stock message board.