Bitcoin is an interesting idea. I do think it can be considered money. I prefer a gold standard, but admire its representation of idealism into reality through the Internet. Bitcoin seems like the late night, idealistic anarchist ideas I would laugh but consider very interesting the next morning when in college. Moldbug has written well on this one (here, here and here), but Bitcoin was always going to be killed if it ever posed a true threat. The other problem would be the low barrier to entry, inspiring other entrants. Killing an idealistic and rebel idea is a bit risky in the age of faux rebellion, so why kill what you can reduce to ridicule and smear before strangulating.
Bitcoin has a '90s Internet feel to it. Back in the '90s, us nubes didn't know the porno theater-shopping mall-forced family reunion that the Internet would become. The Internet was sold to us as anything we wanted it to be. A virtual currency sounds straight out of Internet 1.0. "Dude, my money is totally in cyberspace". With widespread attention and enough information for early adopters and Etsy styled microbusinesses, I could see Bitcoin catching on, then add in the black and grey markets and you have a base. In an era of competitive currency devaluations, Bitcoin would be a small problem and challenge to the US leadership. Snuffing out Bitcoin would appear heavy handed. Before icing Bitcoin, it would be best to smear it and spread propaganda of its danger and weakness to manipulation. It is not just about Bitcoin, but any type of virtual Internet currency.
That is most likely behind the Bitcoin mini-bubble. Zero Hedge has reported on its spike and crash (1, 2). Hinted in ZH's Winklevoss Twin post is how the central banks might be holders of Bitcoin, waiting to sell it off again. The feds have been warning of potential money laundering issues with Bitcoin. This is an anthill compared the HSBC drug money laundering, but HSBC is part of the ruling bank cartel. The feds might fear the attention Bitcoin received after the Cyprus money grab pushed some people into holding Bitcoin. The feds then could sick Kevin Henry, FED trader extraordinaire, on Bitcoin's incredibly thin market. If the FED can keep the long end of the UST bond curve in line for years, then manipulating Bitcoin's tiny market would be easy. Bitcoin : UST market = flea : 'roided up elephant. Bubble up, media attention, crash, more media attention, and then "look at the dangers of virtual currencies, they must be regulated".
The feds could use a sledgehammer to Bitcoin's face or they can do what they do to many entities, act like a velvet gloved Gestapo. It is true they have no intrinsic value, and that while the US $ is fiat, it is the lube for the USA Godfather protection racket. Another reason why we need to move back to a gold standard. Bitcoin now can be discussed by low information news consumers, mocked on Saturday Night Live, and smeared from use by middle adopters. The Bitcoin bubble and crash can be used as an example by our powers that be to regulate virtual currencies or dare I say, outlaw all virtual currencies. The folks at home can rest soundly, unaware that the men and women at the Federal Reserve and other central banks are the only ones allowed to create money at a computer terminal.