Any economy built on a currency that fluctuates this wildly is going to be unpleasant.
I don't know how someone can genuinely believe that bitcoin is a currency with this kind of pricing turbulence. It is behaving like the focal point of rampant speculation.
I suspect the current fluctuation is only a result of newness of bitcoin and that over the years as it becomes more familiar, the fluctuation will mirror more common currencies. I suspect that in order for that to happen, it will need to become more liquid, with more places accepting bitcoin for purchases, and more people using bitcoin to purchase goods rather than as an investment tool.
The "problem" is that the number of bitcoins is asymptotically bounded from above, but there is so far as we know no similar bound on human productivity and output. So there's really no reason to think that the deflation of bitcoin would ever die off. At most it would slow down, as right now the upward trend is fueled not just by the "natural" deflation of the currency but also as it plays catch-up to the market cap of more established currencies, like the USD.
It's worse than that. As the post at the root of this thread observes, it's possible for bitcoins to be lost forever. So while the total number of possible BTC is merely asymptotically bounded, the actual number of BTC in circulation is going to peak and then go into a period of inexorable decline once the rate at which BTC are "destroyed" by data loss exceeds the rate at which BTC can be mined.
Any economy built on a currency that fluctuates this wildly is going to be unpleasant.
I don't know how someone can genuinely believe that bitcoin is a currency with this kind of pricing turbulence. It is behaving like the focal point of rampant speculation.