Why is the value so different from month to month?It's the easiest calculation in the world. Think of the Bitcoin system as a global savings account that anyone on the planet can securely deposit money into. The value of one Bitcoin equals the sum of all deposits divided by the number of Bitcoins in circulation. That's it.
So you are saying that 30% or so is lost in the system and can never be recovered?There will ever only be 21 million made but estimates are looking like it's really going to end up being 14 - 15 million because the remainder will end up being lost forever due to certain bitcoin holders forgetting their private keys or dying suddenly without leaving anyone access to their keys. In fact, a lot of that remainder has already been lost just from stories we've heard about people with significant bitcoin holdings dying suddenly. And that's one of the reasons why Bitcoin is deflationary by nature.
Let's pretend that the entire system stopped allowing deposits and withdrawals for a few years. Your Bitcoins would still go up in value over that time period because people are still going to lose their keys, die unexpectedly, etc. which will have the effect of making your bitcoins more scarce and therefore be worth more. And since nobody can increase the supply by saying "let's create some more Bitcoins to replace all those that were lost", the money supply can't be tampered with.
But isn't bitcoin mining a bit like trying to find a private key. I know the odds of finding a private key are astronomical but if someone manages to guess your key, then what?
The value will depend on supply and demand. Bitcoin is first to market so to speak but look at the competitors out there. What happens if the demand drops.So unlike fiat currency, there's no Central Bank required to constantly monitor and modify the money supply by printing more currency, raising interest rates, etc. The supply of BTC is hard coded and deflation is part of the system design.