> It's denominated in USD already, so increases in USD should be priced in.
No, as explained in the other comment.
> Also, Silk Road has become a small part of bitcoin transactions.
Citation? Also, I was using Silk Road as an example; any transaction which is denominated in USD and simply uses bitcoin as a proxy would further this phenomena. Many places that "accept" bitcoin only do so temporarily. They immediately convert any received bitcoins into USD. The EFF is one such example [1].
It is not denominated in USD. It's a currency, and like any other currency you can exchange it for others, including USD, which is why you often see exchange spot prices in USD.
One exchange rate is BTC - USD. That does not make the currency itself USD denominated. Bitcoin is almost always denominated in BTC these days. There are other bitcoin denominations, like the Satoshi [1], but these are rarely used as BTC has not appreciated enough in value for them to be useful. You seem to be confused about what denomination means in the context of currency, see [2].
Also, Silk Road has become a small part of bitcoin transactions.