Looking away from the action of the last few days, I think the main driver of the market currently is "unwillingness to sell at current prices", low selling pressure, same thing I guess.
There was enough fiat sitting on the sidelines to turn the above into a +45% rally, but the biggest question to me right now is: will selling pressure return before buying pressure (mainly through new fiat, I believe) does, or will whatever fiat is /still/ sitting on the sidelines be convinced by the lack of selling pressure that it might as well enter the market now.
It is true to say that the leveraged longs on Bitfinex are very high at the moment, if indeed not maxed out going by the hike in the swap rate from 0.1% to a whopping 1% per day during one of the $680-$620 slides. Have you however been watching the wall action on Bitstamp over the past few days. On a few occasions it seemed as though Bitfienx and Huobi wanted to break out of the downtrend, but there was a 1500 BTC Ask wall on Bistamp at $675 that nobody seemed to want to bite into. I would suggest that this held the rest of the markets back. The resistance was tested at $670, and held, and then the selling pressure picked up and the massive wall was gradually moved down in increments of $5, decreasing in size a little each time, until it sat at $655 at around 1100 BTC strong. This wall sat there as impatient traders started to market sell into Bid wall. The bottom came with some 500 BTC being market sold into bid wall which caused test of pennant support trendline at $635. Then as was pretty predictable, buying pressure kicked in and took us back up to $655 1100 BTC wall. Perhaps the whale was asleep and wasn't trusting his wall dynamics to a bot, as around 300 BTC of buy-ins were taken out of the whales wall. The whale then removed his wall, and (probably) bought the 300 BTC or so of bid offers that were placed below his 1100 BTC wall, possibly in order to replenish his lost BTC.
A bit long winded perhaps, but what I make of this is a blatant whale market engineering attempt. The market has been intentionally corrected at $680 , where selling pressure has been tested, and supported at the 23% Fib retracement level ($610-$620). From the first correction from $680 to $614, the recovery came about as the result of some quite inexplicable buying patterns, whereby a whale made a 600 BTC market order on Bitstamp into such a thin market that the price rose by $30. This was followed by a 750 BTC Bid wall at $665. This strategically deployed buy-in pressure and all the rest of the organic to-ing and fro-ing of Bitcoins during this, provided the high volume required to form a seemingly bullish cup n handle formation on the Bitstamp chart. That failed, and Bitcoin has been converted to forming this current bullish pennant formation, which the 'Wall Guy' I describe above has clearly been trying to engineer.
What I am suggesting is that this market is to a large extent being stage managed by powerful market players. The activities of 'Wall Guy' that I described above, is perhaps evidence of someone wanting to push Bitcoin down to trendline, and then allow it to rise back up without him losing any Bitcoins in the process. He has adjusted the sizes of his strategic walls, and only moved it down so far as to push spot price to the pennant support trendline, but not beyond. His removal of his wall followed by the buying of a similar amount of coins that was taken out his wall prior to it's removal, is suggestive of attempts to coerce Bitcoin back up to resistance, whilst recovering any lost Bitcoins in the process, suggests that not only is this whale entity trying to shake out weak hands and engineer positive chart formations, but that he is also bullish on Bitcoin, at least for now.
My take on market psychology right now is that frustration prevails, but the weaker Bitfinex leveraged longs and other weak hands have mostly been squeezed for now, most participants believe Bitcoin will trend a bit higher yet, or may well even be on the cusp of another of it's famous bubbles and are not so willing to sell. The 'Market Engineers' have tested the markets resolve, and perhaps after allowing the market to thin out to a crisp, will attempt to ignite it with a bout of buying pressure, which if all goes to plan and enough capital in the market takes the bait, will result in another strong move up.
I see perhaps a retest of $640 (the lower limit of this bullish pennant). I no longer think that the market is going to break down the way, except perhaps for the sort of false break that Bitcoin is famous for, which happens nearly everytime Bitcoin leaves a consolidation zone.
I am confident in the market for the time being. With the pending crossover of the Weekly MACD, 10/21 SMA, and the 200 day SMA currently being tested, I would say that the Market Engineers must surely be thinking that now is as good a time as any to try and engineer a massive price surge in Bitcoin. Whether enough organic buying pressure can be whipped up to take out ATH remains to be seen, but with these strong indicators at their backs, they can surely get a much higher price than $650 to perform a mass sell off into.
