Bitcoin is going up in price because people believe it will be used as a medium of exchange and store of value. If they realise this wont happen it will collapse in price. So lets look at these two aspects.
1) Medium of exchange.Bitcoin is only a medium of exchange when merchants accept it and hold onto it. Right now merchants are dumping bitcoin for dollars, so its not being used as a medium of exchange. This btw. also throws the transaction cost benefit argument right out of the window (spread).
Now will merchants ever accept bitcoin and hold onto them?
No.
Why?
a) Governments have already effectively made it impossible for people to use bitcoin as a medium of exchange, as they expect taxes to be paid on bitcoin gains. Thus it cant function as a medium of exchange (same goes for gold btw.). Unless Government loses its control on its money monopoly this law wont be altered.
b) Governments will prohibt merchants from accepting bitcoins. Again: They will never give up their monoply on money.
2) Store of ValueAfter people realize that merchants are not adopting bitcoin and that it is not used as a medium of exchange, it will collapse in price. Will anybody store significant wealth in Bitcoin after this spectacular collapse? Not likely.
Also Bitcoin is a technology, that can be outcompeted by other altcoins. Your wallet can be hacked. The average citizen cant judge if the code can or can not be hacked and thus more bitcoins created. If you want to store wealth over a long period of time investing in a technology is not the best and easiest option. Also Bitcoin is not useful or wanted. If you ask a Bitcoiner what can I do with it they will say: dump it on the next guy it will go up in price! Gold and Silver where always wanted (jewlery and nowadays industry) and thats why they became MONEY in the first place! They have unique properties and everybody love to hold them in their hand. This will always be the case ensuring significant value and acceptance. Nothing like this can be said for bitcoins. Thus I dont believe bitcoin will function as a store of value in any significant way.
Conclusion:I predict bitcoin to collapse in price (as it wont be used either as a medium of exchange nor as a store of value).
EDIT: The price increasing shows bitcoin is used as a speculative vehicle. It does not demonstrate bitcoins viability as a store of value or medium of exchange.
(Additional line of attack for governments: Government could come down hard on miners. They could make it illegal to mine bitcoins. Then bitcoin will lose all of its advantages compared to alternative cryptocurrencies. It will be a code like the rest of them.)
EDIT2: Also consider this post (on why bitcoin cant be money):
https://bitcointalksearch.org/topic/m.3926046