I am new here. Been trading bitcoin for a month now. I am young but I have studied markets seriously for about 4 years now. Not just technical analysis but also financial history and a little known subject known as market microstructure -- which is basically the study of "how" trade occurs in any market. I have never seen a market trade quite like bitcoin and probably never will again. It makes silver's runup 3 years ago look like child's play.

You can attribute bitcoin's crazy runup to news, value, or mania, and every answer has validity to it but I have another answer that's just in front of everyone's eyes. It's an extremely illiquid and thus extremely volatile market. It's that simple. My theory is that it's a unique combination of bitcoin's low float, the ineptitude of the primary exchange mtgox, and a young market (only 3 years old) that lacks sophisticated liquidity provision (i figure most of the supply probably belongs to the major miners, whom have more expertise in technology than being efficient market makers). Along with that, it is also difficult to move a lot of cash around to all the major exchanges, and to short sell, creating barriers to entry for bigger money players who could add a little liquidity. There are one hour bars that represent 50% and 100% moves... in BOTH DIRECTIONS! When I watch it trade on clarkmoody, it just strikes me as so inefficient. Like the people who are making the biggest decisions probably never traded their entire lives. They send market orders down for 20 straight points, and then the other direction for 15 points within the next 5 minutes! Who trades like that? Or maybe something else can explain that phenomenon? Another crazy anomaly to me was the lack of volume increase while the price kept soaring... usually bubbles require increased participation until there is nobody left to buy, or total short seller capitulation (which isnt possible in this market). Almost every parabolic chart has increased volume towards the peak.

The only market that I have ever seen comparable to bitcoins in terms of how fast it can rise and how easily it can fall, are OTCBB bulletin board stocks. Pump and dumps, basically (though not all of them, see FNMA, FMCC both which recently had a parabolic rise and fall but are real companies). Not saying bitcoin is a pump job, but there are some apt comparisons. For one, the OTCBB is highly illiquid. They are not like their NASDAQ/NYSE counterparts where you just click a button and get out of a position within milliseconds. 95% of the time you can out reasonably well, but when there is a panic (or a squeeze), your fill is at the mercy of the market.... kinda similar to getting out of bitcoin near its highs with all the lag on mtgox and all the bids disappearing.

I am not a bull or bear, just someone who wants to make money. I really do think this is the frontier of trading right now. If anyone else shares the same line of thought with me, as opposed to say, being obsessed about where bitcoin will be in 3 years (which frankly, I don't care about), send me a PM.