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MTGOX:BTCUSD   Bitcoin / U.S. Dollar
31
My prediction remains bearish , but I want to detail a very-real scenario that I believe has a high probability of occurring. This prediction acts against a backdrop of why I believe that yes, this is a bubble and, no, anything north of 1000 is not sustainable.

To fully deluge my bearish 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 bullish 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 bullish 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 bearish before we saw a crash below 900.

Given the backdrop of corrections, the extreme deluded bullish 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 volume 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 volume 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 bearish and I believe that we will be south of $1000 soon.
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