How does this prove it is a bubble? If anything, isn't this evidence for the opposite? I expected the price to drop dramatically after the Silk Road shutdown.
Not really. The market was well-aware that SR was an illegal enterprise which could end at any time. The risk should have already been priced in. To a reasonably efficient market, good news is not good news if it was already predicted, and bad news is not bad news if that had been predicted instead. What matters is the extent to which the news is better or worse than predicted.
In SR's case, the news was better than one would have predicted. Despite it being the worst-case scenario - the server seized intact, Ross's laptop seized unlocked, all outstanding balances confiscated - it wasn't that bad because Ross's personal savings do not yet seem to have been taken, the current seizures will not be sold until the trial is over, and the bust was not due to breaks in either Bitcoin (they didn't even bother with blockchain analysis in the indictments!) or Tor (as far as we can currently tell) but to errors and overwhelming hubris on Ross's part, so SR could be and was quickly replaced by a flood of clones/competitors (at last count: BlackMarket Reloaded, Sheep Marketplace, BuyItNow, DeepBay, Budster, & Black Flag are all actively buying & selling; in addition, The Market and Silk Road Reloaded are expected to come online in the next few weeks/months).
