"The more merchants like TigerDirect and Overstock "embrace" Bitcoin, the more bitcoins will be sold at the exchanges"
False.
Case in point: the number of merchants accepting bitcoins has dramatically increased over the last year. Yet the exchange rate has increased. This is the case because interest/demand in bitcoin seems roughly proportional to the size of the Bitcoin economy (what you can do, where you can spend them). So the more merchants -> the more interest -> the higher the exchange rate.
False.
Case in point: the number of merchants accepting bitcoins has dramatically increased over the last year. Yet the exchange rate has increased. This is the case because interest/demand in bitcoin seems roughly proportional to the size of the Bitcoin economy (what you can do, where you can spend them). So the more merchants -> the more interest -> the higher the exchange rate.