A great blog post by Paul Krugman:
I have had and am continuing to have a dialogue with smart technologists who are very high on BitCoin — but when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how it's a terrific medium of exchange.
Regardless of Bitcoin's market fluctuations, we must understanding how Bitcoin will retain its value is key.
Physical coins and banknotes works because it can be used without any other technology. While technology must be used to create currency, no technology is required to use those coins or bank notes. If the power goes out, how am I going to spend my bitcoins? For a currency to be successful, it must store value and be exchangeable. It is hard to see how bitcoin, or any not other crypto-currency can meet both requirements.