Time for a big rebound?

[bozak]

I think we will see a pretty big rebound today or tomorrow.  I know that all of the technical analysts are predicting gloom and doom at this point, but that is simply because technical analysis always just says the current trend will continue.  Here are the reasons why I think we will bounce soon. 

1. VC and hedge fund radar.  Although it is unclear how much of the money that led to the original soar to $260 was from hedge funds and venture capital firms, it is reasonable to assume that many funds and VCs are now aware of bitcoin.  At least some of these new entrants are probably looking for a good buying opportunity.  The total amount of fiat $ in bitcoin is still very small relative to pretty much all other currencies and commodities.

2.  The potential of bitcoin has not changed/decreased from just a few weeks ago.  Anyone who is looking for an entrance and understands bitcoin, will realize that this is a big opportunity compared the price of entrance in the recent past.   

3. The market seems to be reacting to false media coverage.  It is strange how many people are anti-bitcoin without actually taking the time to understan it.  A lot of this negative sentiment has been formed by people reading a few false or misleading statements.  Such as the inclusion of drugs, illegal activities, ponzi-scheme, et, in most bitcoin related articles.  As the bitcoin infrastructure continues to evolve, hopefully, the media coverage will become more focused on the benefits of bitcoin and crypto-currencies ingeneral. 

4.  Investments in infrastructure will start to pay off.  Although bitcoin has come a long way in ease of use and security options, it is still difficult for the average person to buy bitcoin and there are still a lack of trustworthy options to store bitcoin for those who do not want to deal with storing it themselves.  There are many new exchanges that are about to open, coinsetter, buttercoin, coinlab to name a few.  Many other products and services based on the protocol are also going to be realeased in the next few months and years.  In other words, the money that VC firms are spending, will start to improve the bitcoin infrastructure, make bitcoin easier to use, and open the technology to many new consumers.   

5.  Fiat currency based financial crises are not over.  There is still a strong incentive for all investors to deversify out of fiat only currency exposure.  Although there has not been a Cyprus style news event recently, many governments are still loaded with unsustainable debt and it is only a matter of time before the next financial crisis appears. 

Obviously, many of these points are not near term time contingent, i.e., they will not directly result in a bounce in the exchange rate today or tomorrow.  However, collectively these points highlight why new and current investors should view any significant downtrend as a buying opportunity.  We are about to hit a 50% decline in the last 2 weeks.  If you are looking for an entry point, a recent 40%-50% decline without a decline in the long term prospects for bitcoin, sure seems like a good deal. 

[Akka]

You kake pretty good arguments and try to explain it rationally.

Problem is, markets simply are not rational.

It's pure psychology, mud could become worth millions and gold could become worthless given the right psychology. (exaggerating a little).

Once the psychology effect is gone it will return to it's true value and your points will be taken into account. But for now they simply don't matter.

[bozak]

You kake pretty good arguments and try to explain it rationally.

Problem is, markets simply are not rational.

It's pure psychology, mud could become worth millions and gold could become worthless given the right psychology. (exaggerating a little).

Once the psychology effect is gone it will return to it's true value and your points will be taken into account. But for now they simply don't matter.

Yeah, I agree that many bitcoin "speculators" are driven more by physcology than any sort of fundamental analysis.  Since it is really impossible to do any sort of standard fundamental analysis with bitcoin, the temptation to trade off of emotion is even stronger than with other asset classes. 

However, I think this dip will eventually be a the opportunity for big investment firms to get in on bitcoin.  These firms should be aware of bitcoin now, and they should be less likely to trade on emotion and more likely to actually perform an investment potential analysis.