From the first retail purchase using Bitcoin (two pizza's now valued at several million dollars) in 2010 to Overstock.com implementing Bitcoin as a payment option at checkout, real world adoption is starting to take foot.  Everyday, both small businesses and major vendors are announcing that they too will begin accepting the digital currency/commodity.  

In 2013, the price of a single bitcoin started around $13 and then skyrocketed to over $1,000 driven by rampant speculation.  Many people expected that the late 2013 price surge was a bubble and that it would do what it did earlier in the year, drop more than 50% or even all the way down to $0.  The speculative hype has taken a breather with the price of a single bitcoin hovering pretty stably around $800.  The price, at over $1,000 got ahead of the true activity of the market.  Most Bitcoin activity is currently in trading it, much like gold, instead of in commerce.

Over the short term, the price of Bitcoin is likely to trade sideways in a pretty tight trading range (relatively speaking specifically to past Bitcoin volatility) as the utility of it catches up with the recent speculation. There won't be much news to push speculation significantly since a lot of major news is already baked into the price.  China has taken its position, the U.S. has spoken favorably regarding it, and several countries around the world have taken positions.  As the market matures and more coins are mined, the market will be harder to spook one way or the other from a speculative standpoint.

What does the long term outlook hold for Bitcoin?

Over the long term, you'll start to see more companies continue accepting the currency.  As the technology improves, you'll see it become easier to pay in Bitcoin and easier to convert it to fiat and back. I no longer think the price of a single bitcoin will hit $10,000 each in 2014 like the majority of its fans think according to this Coindesk poll.  Instead, you'll see a slow and steady rise with some volitility within trading ranges - $700-$1000, $1000-$1200, $1200-$1500, etc.  After a couple of years where both the adoption and ease of use for the average person is ubiquitous, the price will continue its rise.  When derivative and spin-off markets based upon Bitcoin as an underlying asset form, the price will further appreciate. This appreciation will continue over many years.  

The main advantage of Bitcoin versus a commodity like gold is that Bitcoin can be used easily in commerce. The price of Gold is relatively limited to how much it can increase because its price is mainly based upon speculation versus use. Yes, there's the argument that its used in jewelry and electronics, however, those uses are dwarfed by the trading activities in gold. Bitcoin has the same problem now, but over time the use of it in commerce will grow creating a more solid foundation for holding Bitcoin beyond majorily speculation.

I'm obviously a big fan of Bitcoin and digital currencies/commodities in general because of their utility in a connected world.  Because of this, I see the long term outlook as very strong, but as with any technology that grows quickly, its the early adopters who reap most of the benefits. Those coming aboard now and investing at current pricing levels will see nice returns over many years, but don't expect to see the same rapid 10,000 percent rise as we saw in 2013 from $13 to over $1,000 in a single year.

Why Bitcoin is poised to break out to all-time highs