Illiquid markets, such as Bitcoin are easy prey to manipulation.
The principle is to draw attention by buying a pretty big quantity (compared to the daily number being bought and sold) and once this attention is drawn, more and more people will start buying trying to jump on the bandwagon and trying not to miss the train.
This is on a larger scale exactly what happened in the summer of 2011 when the price of a BTC went all the way up to 30 USD a piece.
Such phenomenons normally end up with a massive selloff, (exactly what happened in the above mentioned example when the price went down to 3 usd, losing about 90% of its value) where a lot of late joiners got burned, lost lots of money and abandoned the game saying it's rigged, when the only thing that was rigged was their intelligence.
Rallies and inevitable subsequent bubble bursts aren't good for bitcoin.
The movement we experienced in the last 2 days (about 7% up) isn't good for bitcoin.
What we should need and hope for is a slow movement up, of about say 1-2% each week, due to a growing number of bitcoin adopters and to the fact that this adopters demand SLIGHTLY outpaces the number of bitcoins being sold by miners and people that accept payments in bitcoin but then need to translate those into fiat money.
Everything else should be seen as a danger for bitcoin and not cheered as most people do.
Rally is bad, not good!
We all need to understand that or we will keep being a bunch of goofy beginners easy prey of speculators
I disagree.
You are assuming that the price of bitcoin reflects (or should reflect) it's
current usefulness as a medium of exchange for the bitcoin economy. That's only partly true (I'm guessing the price of a bitcoin would have to be 0.25 USD for the current supply to be able to "run" the current bitcoin economy).
A large part of bitcoins value comes from the
expectation of future usefulness as a medium of exchange and it's
usefulness as a store of wealth.
You cannot remove these large components because bitcoin is money and that's just part of that.
A 7% rally in bitcoin is not "bad for bitcoin". It might be annoying for the people using bitcoin as a medium of exchange because those fluctuations introduce pricing problems, but that just has to be accepted and worked around.
A 7% rally doesn't have to be "pump and dump" either. It can just be the case that the expectation of future usefulness has risen (due to some news) or speculators have adjusted their expectations for any number of other reasons.
A rally can be bad or good, depending on what's behind it.