Five Bitcoin Predictions for 2014

After Bitcoin exploded onto the financial world last year, it immediately became enveloped in controversy, with just as many predicting its imminent doom as were declaring it a revolutionary form of money.

The Bitcoin news in 2014 will have less drama but will be far more important to the fate of the digital currency.

Last year Bitcoin prices endured not one but two crashes, in April and again in December, in gaining a reputation as an uncommonly volatile investment.

And Bitcoin shed some guilt by association when the U.S. government in October shut down the underground web site Silk Road, which allowed people to use Bitcoin to buy and sell illegal drugs.

While its growing pains are far from over, 2014's Bitcoin news will be mostly about the world coming to terms with the cryptocurrency as it gains wider acceptance.

Bitcoin News 2014: Five Predictions Bitcoin News Prediction No. 1: Merchant Acceptance Reaches Critical Mass

We saw several prominent merchants announce in 2013 that they would accept Bitcoin as payment: online retailer Overstock.com Inc. (Nasdaq: OSTK), game company Zynga Inc. (Nasdaq: ZNGA), dating website OKCupid, and blogging platform WordPress. In 2014, that trickle will become a flood as merchants realize the benefits of Bitcoin, such as more affluent techie customers as well as lower transaction fees compared to credit cards. Once the trend starts to accelerate, no one will want to be left behind.

Bitcoin News Prediction No. 2: Third Parties Make It Brain-Dead Simple to Use

One of the primary issues holding back more rapid adoption of the digital currency is that anyone who uses Bitcoin needs to be technically savvy. But such a problem invites innovation, and we're sure to see a lot of companies in 2014 coming up with ways to make Bitcoin easy and intuitive. We've already seen such companies as Coinbase and Robocoin (which has built a Bitcoin ATM) take the first steps in this direction.

Bitcoin News Prediction No. 3: Governments Make Their Peace With It

The governments of the world spent much of 2013 struggling to figure out what to do about Bitcoin, particularly in regard to regulation. Should it be treated as a currency? A commodity? And how should it be taxed? Or should it be banned altogether? Expect most developed nations to work out answers to these questions in 2014. And as the regulatory atmosphere surrounding Bitcoin gets more settled, it will reassure more people and businesses that it's safe to start using it.

Bitcoin News Prediction No. 4: Wall Street Will Jump In With Both Feet

Any investment that shows the kind of promise that Bitcoin did in 2013 - its value increased 60-fold over the past year - is going to get Wall Street's attention. Second Market already is running its Bitcoin Investment Trust, a private fund with a minimum $25,000 investment. And investing in Bitcoin will get easier for retail investors as well. First on tap is an ETF created by the Winklevoss twins, the Winklevoss Bitcoin Trust, which is awaiting SEC approval. And expect the Big Banks to start getting more actively involved in Bitcoin; Wells Fargo & Co. (NYSE: WFC) convened a meeting just last week of government officials and finance executives to determine the "rules of engagement" for the digital currency.

Bitcoin News Prediction No. 5: Less Volatile Bitcoin Prices

The days of gaining 1,000% in a matter of months only to plummet 80% (as happened in April) are pretty much over. Not that there won't be volatility in Bitcoin prices, but you'll see it trading in narrower ranges as the year progresses and the digital currency becomes more and more mainstream. Less volatility will help ease concerns over the use of Bitcoin as a currency, since it will reduce the risk of holding it for any length of time.

Time and time again, so-called experts have declared the death of Bitcoin. And yet not only has Bitcoin survived, its value has continued to rise and adoption continues to spread. Here's why governments, "experts" and skeptics everywhere have been so wrong about Bitcoin...