Bitcoin Summer 2014 - Stability and Good Expectations

For those unlucky enough to buy Bitcoin at $1000 per coin last year, the last 7 months have been difficult times. The price has traded as low as the mid 300's briefly. Between poor regulatory climates in a number of foreign countries and the collapse of MtGox, there has been a lot of negative news.
On the bright side, the tremendous level of venture capital and innovation pouring into development of the Bitcoin ecosystem has continued and even accelerated. The price of Bitcoin has stabilized and has shown steady improvement. The recent US Government auction of seized Bitcoin went very well, leaving a large unmet demand for Bitcoin investors. In the next few months, we can expect Bitcoin investment vehicles to be trading on NASDAQ or even NYSE. I predict significant price appreciation in the next 3 months. (I have been wrong before, invest at your own risk)

Chart since November 2013

From BitcoinCharts.com

Bitcoin Climbing High Again

Bitcoin is on a steady 5 day climb. At this rate it will be back at $1000 next week. If you haven't got in yet, you may want to wait for the next drop or you could ride the wave and see where it takes you.

This chart is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.

Link to Chart

How to Safely and Securely Store Bitcoins - Cold Storage

You should never store Bitcoins in an online account or on an internet connected device. Think of those things as your wallet. You keep a few bucks there but not your net worth. The reason is that a physical wallet can be easily lost or stolen. In a similar fashion, when you keep Bitcoins in an internet connected account, computer, or mobile phone, they can easily be lost or stolen.

Obviously, using unique and difficult to guess passwords as well as two factor authentication will improve the security of your online account or Bitcoin wallet. The most secure method, however, is cold storage.

Cold storage is when your Bitcoins are stored in such a way that they are completely inaccessible to hackers. There are 2 ways to keep Bitcoins in cold storage. One is to transfer the Bitcoins to a Bitcoin wallet that is not connected to the internet. A flash drive could be used for this or an old computer that is not connected to a network. The 2nd way is to transfer the Bitcoins to a paper wallet.

A paper wallet is a piece of paper with a Bitcoin account and private key written on it. If your Bitcoins are stored on a physical paper wallet, the only way to get the Bitcoins is for a thief to physically see the wallet. As long as you keep the wallet hidden, it is completely secure. A paper wallet can also be password protected so that even if the paper wallet is stolen, the thief can not access your funds. You could continue to access your funds as long as you have a copy of the paper wallet.

The easiest way to print a paper wallet is to go to www.bitaddress.org and click on paper wallet and print it. Make sure to make a copy of your wallet. If your paper wallet is lost or destroyed, you will NEVER be able to access your Bitcoins. They will be lost.

Bitcoin Price Progress

The the price of Bitcoin on the common exchanges has shown exceptional resilience over the last 10 days. Here is a chart showing the price on Bitstamp in US dollars.

This chart is licensed under a  Creative Commons Attribution-ShareAlike 3.0 Unported License.

There were negative news items from China and India which negatively impacted the prices, however, the upward trend continues. The fact is that Bitcoin trading has not been banned in China or India. Governments are nervous about the use of Bitcoin as currency especially concerning their loss of control of their monetary policy and have issued restrictive regulations. Despite this, the Chinese and Indians continue to invest and purchase Bitcoins. It looks like we will end the year with Bitcoins trading at a little less than $800.

Another Bitcoin Price Drop

Depressing week for bitcoin investors

By Sander van der Wel from Netherlands (Depressed  Uploaded by russavia) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

The Chinese government continues to exert negative influence on the Chinese bitcoin market with additional regulations. This has resulted in a severe drop in bitcoin and other cryptocurrency prices. For those unlucky enough to have bought at $1000, the loss in value is almost 50%.

By Drawn by User:SKopp, redrawn by User:Denelson83 and User:Zscout370  Recode by cs:User:-xfi- (code), User:Shizhao (colors) [Public domain], via Wikimedia Commons

The long term prospects for bitcoin as a currency have not been significantly damaged since there are always ways to circumvent government controls and there are many markets that bitcoin can be freely exchanged besides China. This may be another buying opportunity, however, there is obviously tremendous risk with this kind of volatility.

Bitcoin price drop

By Afaber012 (Own work) [CC0], via Wikimedia Commons

Bitcoin lost over $200 today after Chinese officials said that Bitcoin was not to be considered an official currency and could not be traded by Chinese banks. The price of Bitcoins has swung dramatically over the last month. If you believe in the long term potential, this could be an excellent buying opportunity.

How to buy Litecoins

At the time of this post, litecoins can not be easily purchased with US dollars. The quickest way to obtain litecoins is to buy bitcoins first and then exchange them for litecoins.
I recommend using BTC-E.com for the exchange. There are many others that will work as well.

By fanquake, jaromil and gavinandresen [see page for license], via Wikimedia Commons

1. Buy Bitcoins see my previous post
2. Open an account with a bitcoin exchange such as BTC-E.com
3. Fund your exchange account with bitcoins. There should be a link to fund the account with bitcoins. The exchange will give you a bitcoin address to send the funds to. Copy this address and then go to your bitcoin wallet and click "Send Coins". Enter the address given by the exchange. Your coins should transfer in about an hour.
4. Place a bid on litecoins either at the market rate if you want immediate execution or at a lower rate if you want to try to pay less and wait for the sale to go through. Once the trade executes, the litecoins will be deposited to your account.
5. Send the litecoins from the exchange to your wallet (you need to download a litecoin wallet first. You just need the address of your litecoin wallet. Place this in the "Send To" field on the exchange website and the litecoins should be in your wallet in 10 minutes.

This will work for any crypto-currency that you want to purchase. You just need to find an exchange that allows the trading between the two currencies that you are interested in. Here is a list of exchanges with their volume and currencies.