To fully deluge my reasoning I'd need to write a short essay so in the interest of brevity I'll keep this fittingly short. We are in a state of mania where people's expectations and reasoning have completely diverged from reality. We have experienced all the news that there is and, for now, will be. That people are deluded is obvious from their expectations of how the news is going to impact the price. Very few seem to have considered that the price already accounts for the supremely sentiment that we are currently experiencing. The current price accounts for more than that - embedded within is the sum of speculators hopes, dreams and illusions.
Most people seemed to interpret the sideways action north of $1200 as evidence of an extreme level of support. Any dip in price was immediately bought by a seemingly infinite pool of so-called investors. However the price was being supported by speculators - not investors. This is a non-trivial point for it establishes that the price, high as it was, only received support at certain levels due to expectations that it would reach yet further. But it had hit an inevitable wall since the expectations of a rise in price were not being acknowledged by reality. The buy support was not support, so to speak, it was expectation.
All forums for discussing Bitcoin have become little more than a hive mind circle-jerk with expectations that extend well into the range of delusion. The traders on Reddit's "Bitcoin Markets" act as a sort of sentiment index of Bitcoin's learned traders and beyond the usual platitudes and market truisms ("But maybe there will be a correction") very few were before we saw a crash below 900.
Given the backdrop of corrections, the extreme deluded sentiment tempered with uncertainty, widespread belief that Bitcoin is truly worth $10k USD, the notion that China will lead to a trillion dollar market cap and the foolhardy idea that Bitcoin is about to attract new investment I want to advance the following idea. In the short term I believe that we may be about to enter a rapid rally backed by strong and extreme momentum similar to what we saw when we crashed from $900. This rally will be fuelled by hope, greed and panic. It will end - rapidly - in an epic sell-off as people realise that there are no more greater fools above them.
To confirm, look for large on buy orders coupled with weak declines. Sentiment should be manic with the notion that $1500 - $2000 is the next target being widespread. As I write this, I see a clear cup-and-handle formation on Gox and BTCChina within the 5m charts.
This is just a scenario that I estimate to be strangely probable, if it comes to fruition you may make your own judgement. In any case, my sentiment is and I believe that we will be south of $1000 soon.
Firstly, Traxtar928 was right to identify the value of the chart in the write-up. I drew the lines based on a qualitative analysis of the market. No TA was involved whatsoever. If it is accurate then that is only because the analysis itself was accurate.
I correctly predicted the first crash but lacked the foresight to envision the role of previous price action and various other factors (the difficulty of withdrawing fiat etc) on the consequent rally. I had anticipated the crash, but the rally somewhat confused it me. It became immediately obvious that I was missing the larger picture. My reasoning, however, remained unchanged and that lead me to predict a powerful throwback when we passed $1200. Some attribute the consequent crash to coincidence, as a strong piece of bearish news emerged at the time. I disagree on this point, I believe the impact of the news may have affected the magnitude of the crash but it certainly did not dictate its incidence.
Following my reasoning, the consequent "rally" would be stopped far shorter than the previous throwback. The realisation that new money had dissipated would break the illusion that bulls could simply buy and sell in perpetuity. This realisation would cascade, disseminating like a virus as the momentum of the decline in price continued to increase. Thus the bubble would end.
Some argued that I was short-sighted in anticipating that there would be no further bullish news. I do not agree that this is the case. In reality, the impact of bullish news is vastly overvalued and people have yet to account for the market cap of BTC which can absorb what would have previously been powerful news. In simple terms, if the price was still $120 and the CEO of PayPal had actively endorsed BTC we could reasonably expect a rise. But when the price is $1000? Analogously, people vastly underestimate the extent to which the public are aware of Bitcoin. I believe that it is far more widely known than commonly anticipated.
I continue to be a bear in a bull market but the past few days have taught me a great deal about timing. There is too much irrationally and too much disparity between the reality I perceive and that reported by the majority. But I am extremely alarmed by the popularity of this chart considering that I began learning about trading a little over a month ago (my identification of chart patterns is a testament to that). Everyone should be mindful of this when looking at this chart, don't place any bets just because I was right before.
Case in point, I haven't accounted, at all, for China's unique relationship with speculative bubbles. Things like this are like Wittgenstein's rabbit - they can completely change what you thought was previously a given.
Remember that it's always obvious in hindsight.