I just started reading up on the BitCoin infrastructure and it's quite fascinating. I have some education in economics, but economy is not my main field, so cut me some slack. From what I understand, this shouldn't be a problem and here's why I think so.
While what you're saying is true for "real" economy, it's quite different for BitCoin. When someone's suddenly dumping a lot of currency, greatly devaluating it, you have a reason to believe that this currency suddenly became less scarce. (Alchemists discovered a way to turn lead into gold, gold miners found rivers of gold, USA is printing dollars like there's no tomorrow, whatever.) So you want to get rid of the currency based on reasonable expectation, that it will never return to previous value and dumping it will provide you more benefit.
The key here is you predict the currency will *keep* devaluating until it's no longer useable. However with BitCoins you are not left in the dark and there's no central authority that can screw you up. You *know* the rate at which they are created, because it's governed by two unchangeable variables:
- 50 BitCoins per block (for first 210k blocks, decreasing after that, read FAQ)
- and 6 blocks per hour (self-regulating by the adjustable difficulty of making the blocks)
Furthermore there's a hard cap of 21 million BTC, so there's no way for someone to mint more than that.
Link on topic: https://en.bitcoin.it/wiki/Deflationary_spiral
And FAQ: https://en.bitcoin.it/wiki/FAQ