That is another stumbling block for economists. Infation encourages people to spend or invest their currency as soon as possible, thus keeping the economy in motion. Deflation has the opposite effect, it encourages people to hoard the currency. If bitcoins increase in value, they will be hoarded, and therfore will be less used in trade, and therefore their usefulness will be limited, and therefore their value will collapse. How will this paradox get resolved?
This is of course a perfectly valid argument (and a common one), but what about:1. Even if people hoard in order to further their wealth, they will still have to eventually buy something with their money, or the furthering of their wealth was all in vain (diving in a McDucky sea of physical bitcoin aside). So money will still be spent, except it can be spent when people want to spend it, with no outside pressure.
2. If the value should start to collapse due to low usefulness due to hoarding, then the hoarders would get an incentive to stop hoarding, which would make it more useful again (giving the hoarders a new reason to hoard, and thus a new reason not to hoard, etc.). This will bring a little volatility (much less than today's), but I certainly see a case for an equilibrium.
Disclaimer: I am not an economist. I'm making guesses here (if that separates me from the economists).