The UK Government has announced that it is considering a review on the tax of Bitcoin. At the moment 20% Value Added Tax (VAT) applies on the purchase of the coin and this is causing dealers to locate in more favourable jurisdictions. VAT free Alderney has already thrown its hat into the arena.
The value of the world stock of Bitcoin has risen from US$150m to US$ 10 billion over the past year.

According to the Financial Times Singapore has issued new guidelines which will result in levies on profits from trading in Bitcoin and in recent weeks Germany, France, China, India and Malaysia have all taken steps to discourage its speculation.
If given the choice of holding a Bitcoin or its equivalent value in gold which would you hold? I would pick gold all day long, at the moment. Bitcoins are not really as marketable as gold which can be sold instantly and turned into any currency of your choice. But that does not mean to say Bitcoin has no future. It is early days, Bitcoin has only been around for four years.
What would make Bitcoin more successful? Acceptance, trust, and less price volatility for starters.
It needs to be more acceptable for the purchase of goods and services both online and in retail stores. 

Maybe this will happen over time but I do not see at present any falling off in demand for state-backed currencies (unless you live in Zimbabwe which has switched over to the US dollar).
So far as trust is concerned the mining and exchange of Bitcoins appears opaque when in actual fact it is quite clear. But the consumer does not think so. With a state currency you have a central bank that issues the notes and politicians talk about it endlessly. The consumer has somewhere to go if there is a complaint, not that anyone does, and perhaps they feel there is nothing to complain about! 
So what would make Bitcoins take off? 
1. A financial crisis where people lost faith in printed currencies. But they would not lose faith in all currencies. During the last crisis the GBP lost 20% in value against the dollar. There is always another currency to convert to. 
2. A jurisdiction that created sensible regulation around the trade of Bitcoins. 
3. Major online retailers accepting Bitcoins as payment for goods such as Amazon. But Amazon owns PayPal. Would this be in Amazon’s interests? 
4. Less volatility in the price. The price this last 12 months has gone from US$17.5 to US$954 after touching US$1,230 on 5 December 2013. Would you take a mortgage on your house in Bitcoin? 
5. Inflation. Why hold a currency where a government continues to print more and more making the currency you hold worth less? Bitcoin production is set to grow at 0.6% a year. 
6. Continued anonymity. 
What would be detrimental to Bitcoins? 
1. Government. They could make it illegal to trade in Bitcoin or tax them so it was not worthwhile to make a trade. Fact is that you will always have to pay your taxes in the currency where you live and when governments receive those taxes their spending will be in the currency they issue. 
2. High interest rates. Why hold Bitcoins if your bank is paying you say eight percent to hold a currency in the country where you live? 
3. A scam, examples of terrorists or drug cartels being involved in trading in Bitcoin. Of course they already transact in Euros and Dollars but the authorities would be able to negatively spin the situation, changing public sentiment. Ownership could damage you by association but not if anonymity is maintained. 
Jean-Pierre Landau, a former deputy of the Banque de France, writing in the Financial Times said that the production of currencies expands and contracts with demand in the economy. In that respect Bitcoin is at a disadvantage. The current stock of Bitcoins stands at 12 million and will grow at a predetermined and gradually decreasing rate. Once there are 21 million of the electronic tokens, new production will cease.
Landau goes on to say that this is a fatal mistake because if the Bitcoin economy grows faster than the rate of production the currency will grow scarce and the price of goods expressed in it will fall.
Also the exchange rate will rise significantly. Paradoxically, this rapid rise in the value of Bitcoin makes it unsuitable as a means of exchange. Someone who expects a currency to be worth more tomorrow will be unwilling to spend today and if that is the case very few purchases of real goods will be settled in Bitcoins.
But in the world of the Internet you never know. If someone had said to me 10 years ago that people would own a virtual farm or pet and would dash home to tend to it I would have said they were bonkers. But it happens every day.