Fact is, the *exact* same argument ("this will scare away new investors!") was made in September last year when Silk Road was taken down.

The *exact* same argument was made when price dropped sharply from ~260 to ~60 in April last year.

In either of those cases, nothing like that happened. In case of SR, it was particularly stunning how the brief flash crash (that did happen as a result of the news) revealed a solid underlying buying pressure that was lying dormant until then. It started the rally that led to the December ATH, in fact.

Please note what I am saying vs. what I am *not* saying: I don't claim to know whether the bear market just reversed. Just that looking at an "objectively bad" news item and concluding it will negatively affect price will get you nowhere in market analysis. It's simply not how the human mind seems to work, collectively: any event is interpreted in a highly contextual framework. And right now, I would be careful to conclude that the result of that interpretation is going to greatly depress price (see, e.g., the very solid recovery to ~600, or the huge jump in USD on the Bitstamp order book)