My intuition says it's much simpler than that.

It's been evident for the past year or so that Bitcoin is going to be adopted by businesses as a payment method. As services like Coinbase and Bit-Pay began to mature, others who agreed with that statement bought Bitcoin as a speculative investment, thereby driving up the price.

As it shot up through the hundreds of dollars, we had a bubble. People piled on, and the price shot up to USD 1,200 practically overnight. The slight distrubance, and *pop* - the bubble burst, and the price came tumbling down.

It stabilized around 600 USD, and stayed there for a long time. Months went by, and it became clear that the majority of people who were invested short-term had already dumped their coins - but still, the downward trend continued.

Basically, as merchants began to implement Bitcoin as a payment method, some portion of the people using it were using coins that were previously not on the open market - coins they had mined, or had saved for some time. Those coins were sold on the open market immediately when they were spent to merchants, thereby exerting a negative price pressure. This is the source of the months-long slight downward trend in the USD/BTC price.

When we broke 500 USD on the way down, people panicked a bit and sold. Others saw it as an opportunity and bought, causing a nice little bounce. Still, the trend continued and we got down to USD 350. People panicked again, and we dropped to USD 300 in a heartbeat. As I write this, Coinbase is reporting a buy price of USD 307.

At this point, I believe USDBTC should be at about USD 375 - it's currently about 20% undervalued. I also believe that the USD 300 line is a psychological barrier, and once its broken many people are going to lose confidence and try to get out - or they won't buy, which is effectively the same thing. I wouldn't be surprised to see USD 200 Bitcoins within a month. I also wouldn't be surprised to see USD 700 Bitcoins within a month. It all depends on what the public at large is thinking, and no one has any real way to anticipating that.

Either way, the longer-term downward trend will continue as long as Bitcoin continues to be adopted by merchants, unless there comes a new wave of adoption where people are more interested in "buy and hold" than "buy and spend". This might be a financial crisis in a country with a modern economy (a'la Cyprus), it might be war, it might be the high-profile success of crypto ETFs... I don't know. I do believe that such an event will occur eventually, and Bitcoin price will not bottom out due to merchant sell pressure.

I stand by my previous judgement that Bitcoin will be the foundation of the future world economy. Given the limited number of coins available and in circulation, if my prediction comes true then the price must rise by several orders of magnitude in order to support the volume of transactions that would require.

I've bought Bitcoin as low as USD 0.8, and as high as USD 1170. I'm buying Bitcoin now at USD 307, and I'll be buying it at whatever market price happens to be tomorrow, so long as the fundamental nature of the currency remains unchanged.