As I have mentioned in my previous post, I believe that Cryptocurrencies are here to stay, and that Litecoins are a good buy right now. Before I explain why so, lets go through a little introduction on cryptocurrencies. Since Bitcoin's rise to fame, a myriad of alternative cryptocurrencies (altcoins) have come into existence.

There are over 30 altcoins available on Coinmarketcap.com, but most have meagre market capitalization as compared to Bitcoin. Litecoin is currently leading the altcoin market and is the coin to watch, as I will explain.

One of Litecoin’s most significant claimed improvements over Bitcoin is that it allows transactions to be confirmed as legitimate much more quickly, says Charles Lee, who designed the currency, which is now maintained by him and a small group of other enthusiasts. It is also notable that Charles is currently working in Coinbase, which could mean that Coinbase may announce Litecoin integration anytime soon. In fact, Coblee (aka Charles Lee), posted on trollbox that Litecoin support will be available on several exchanges next week (see the post here).

Litecoin prices have been steadily declining since it boomed alongside Bitcoin earlier this year, and many people do think it will continue on this downtrend to its oblivion. However, it is interesting to note the similarity of Litecoin chart compared to Bitcoin chart right before it started climbing up to it's current level. See the comparison in this video below.

So what determines whether or not Litecoin prices will increase?

I believe that this is largely dependent on the availablility of services built ontop of Litecoin. As long as there remains no significant usage of Litecoins, it's price will continue to decline, possibly to the level of other altcoins. Hence, an example of good news for Litecoin would be trading platforms such as BTC China, or online wallets such as Coinbase integrating Litecoin into their systems.

In this recent Youtube video, the team at 'Let's Talk Bitcoin' discussed Litecoin and its potential which I highly recommend watching.

They mention two main problems faced by Litecoin, namely an infrastucture problem, and an adoption issue. In terms of infrastructure, the number of resources available to trade Litecoin as compared to Bitcoin is currently very minimal. Hence, Litecoin prices have been sliding (or stagnating) since its boom in April 2013. On top of that, adoption of Litecoin by major trading platforms has been non-existential. Even though trading platforms like MtGox have announced Litecoin integration back in May, it still has yet to do so. Until Litecoin sees an enhanced utilization and utility, we will unlikely see Litecoin prices grow. However, my guess is that once large trading platforms or wallets start to accept Litecoin, we may see a great boost in Litecoin prices.

Lastly, they also discuss how the future of cryptocurrency lies in the ability of the payment infrastructure to be cryptocurrency agnostic, that is, that one infrastructure will be allowed to accept different kinds of coins. Much like a packaged solution where vendors can integrate and accept every altcoin. This will allow markets to exist on its merits instead of its perceived value.

This is also in line with much of the discussion I have found on Bitcointalk, such as this one titled "Why the loss of confidence in Litecoin". Some of the comments by users are highlighted here:

Furthermore, this Quora discussion titled "Do other crypto-currencies have a chance or is Bitcoin too far ahead?" generated more than a few interesting comments, as shown below:

Ben Mordecai, Bitcoin Hopeful (See the full comment here: http://qr.ae/NmnvS)

Ben Solmar (See the full comment here: http://qr.ae/Nmnsv)

Lastly, I'd like to end off this post with a more controversial video, linking FIAT currency and a decreasing trust in Governments and Banking corporations, to the rise of Cryptocurrencies.

Cheers & have a great week trading. All the best, and stay tuned!

So you've heard about Bitcoins. Since its boom in April 2013, Bitcoins have garnered immense media attention and continued to show impressive strength, rising steadily and finally breaking the $200 psychological barrier today. Even the recent Silk Road closure couldn't dampen the demand for Bitcoins, as prices continued to rally after Baidu (the Google of China) announced its acceptance of Bitcoins as a payment mode.

The popularity of Bitcoins can be attributed to two characteristics of the currency; it is decentralized, and there is a finite amount of bitcoins that can be mined. As such, Bitcoins are very often said to be similar to be Gold. These two characteristics can be said to give Bitcoins their perceived value.

However, the question on everyone's mind is, what gives Bitcoins their intrinsic value (See a Reddit discussion on Bitcoin's intrinsic value here)? As a relatively new commodity that is still in its infancy stage, there have been attempts by a large number of parties to predict it's price, and to reason its market fluctuations with existing Economic theories. However, in attempting to analyse the Cryptocurrency market, we must keep in mind its infancy, and hence the significance of non-economic factors. The real problem is not what the price will be, but whether or not Bitcoin will even be here in five, ten years from now. The question we should be asking then, should be, what factors determine the viability of Bitcoins as an alternative currency?

In my opinion, the most important factor driving the demand of Bitcoins is its adoption by corporations. Basically, the more companies accept Bitcoins as payment for products and services, the better it will be for Bitcoin's future. However, this can turn into a chicken-and-egg issue, because corporations will never consider transacting in Bitcoins because of its instability. Until Bitcoins find a stable price, it is highly unlikely that this will happen. As MeldrumLaw pointed out in this Reddit discussion, "Bitcoin needs to stabilize (or all fiat alternatives need to simultaneously collapse) before widespread commercial adoption occurs."

It is true that Bitcoins have no intrinsic value, in the numismatic sense. Yes, Bitcoins solve some algorithmic problems through the mining process. However, these computations do not generate any kind of useful data, or solve any real life problems; there is a lack of "useful" input/output in solving alogorithms. Cryptocurrency needs to be more "useful" and solve a problem, in the same way that Duolingo translates the web while allowing users to learn a new language. With this in mind, I believe that a new cryptocurrency will emerge and overshadow Bitcoin, that actually solves a real world problem or generate useful data from all the computational data used. Imagine what could happen if Google is currently working on their own decentralized cryptocurrency?

Bitcoin prices skyrocketed during the financial crisis in Cyrpus as a result of people's distrust in FIAT currency and an increasing demand for an ungoverned and limited alternative.  Coupled with the large (and growing) number of services built around Bitcoins, I believe that Bitcoins, or at least Cryptocurrencies, will be here to stay for good.

In my next article, I'll be talking about alternative cryptocurrencies, and why Litecoins are a good buy right now. Stay tuned!

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