The skinny: Supply is limited, while demand is growing tremendously. Every day more businesses use Bitcoin, and this is not just online businesses. Yesterday I read about yet another bar, the first in Shanghai to accept Bitcoin.

And here’s why I feel more confident in recent news on the bitcoin market than ever:

1. Technology: Major vulnerabilities have not yet been discovered. You would think that after all the analysis performed by countless experts, not to mention countless tech-thieves trying to find weaknesses, by now something would be found. Especially considering what a single BTC fetches these days ($270 USD at least!). I believe it is safe to say, at this point, that the technology is solid. I believe in the next couple of years, the technology will improve so much that we’re going to see Bitcoin in taxis, restaurants, food trucks, and so on. Because if a food stall can use their smart phone to accept value, instead of buying one of those ugly rechargeable credit card swipers, they saved money (and companies like Square already monetize on that premise).
2. Regulation: The general trend with regards to regulation is that while there are still many questions left unanswered, things will eventually settle and business will do its thing, and before you know it, the financial and political ramifications of going against Bitcoin will be so severe that no country will seriously consider it (on penalty of causing great damage to countless businesses). Some countries have indeed already accepted Bitcoin as a legitimate financial tool, and the rest will follow.
3. Business Adoption: As I said above, the rate of adoption of Bitcoin as a protocol, and as a currency, are simply astounding and unprecedented. More high-profile executives approve of it, are investing in it, rely on it in one way or another, or own a Bitcoin startup. I do believe eventually eBay will add Bitcoin support, and PayPal will allow holding a BTC balance. The pressure from the market will simply overwhelm them. And I think they day is not far when investment managers will advise their clients to add BTC futures into their basket currencies (at first in their “high risk” category, but later in their “low risk” category!).

So by how much? And for how long?

It is not inconceivable that the market will multiply a hundred fold at the very least. This probably means that the BTC will be worth $27000 at some point, and people will be trading in milliBTC and microBTC (mBTC and uBTC respectively). And for how long? It is also possible that eventually, Bitcoin will become a currency you use for transferring funds cross-border, while using other digital currencies to conduct local business. It is all quite possible. It is also possible that the Bitcoin protocol will be expanded to create regional sub-currencies (imagine chained block chains per zone: North America, South America, Europe, Asia Pacific…). This will probably not mean a devaluation; the opposite will be true. At that stage, banks will probably be holding their Bitcoin in digital safes just like Gold is kept today, in what would become the equivalent of Fort Knox in the real world.

But the short term…?

Let’s face it, a lot of early adopters will eventually cash out. This will invariably cause some additional “drops” along the road, meaning that Bitcoin investments are still risky if you’re trying to make short term gains. However for the long term, considering Bitcoin fuels real commerce, with a rising adoption rate and rising demand, the trend will remain positive for a very long time.