Coinbase, the largest U.S. Bitcoin operator, and Susquehanna analysts James Friedman and Meghna Ladha got together last week for a one-on-one.

Here are some thoughts for 2014 that emerged from the discussions.

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Focus on merchant acceptance

Emerging trends show increased merchant acceptance, for example by Overstock.com and Zynga.com. Other names appear in the graphics provided by Overstock and Coinbase below.

“While price volatility remains a concern, Coinbase tells us that merchants can convert bitcoins into fiat currency close to real time through a ‘flash’ trade, alleviating some of the concern about FX impacts and settlement risk,” says the Susquehanna team.

Me-too crypto-currencies

Coinbase is seen to have the early mover advantage but entry barriers are low and competition cannot be ruled out, say the Susquehanna team.

There are already nearly 30 virtual currencies and there is speculation that Google Coin too could be on the anvil, according to their research note.

According to this article, “Google is most likely to introduce a rival to Bitcoin with the introduction of a robust coin system capable of standing up against it. This will ensure that the company is able to serve the ever-increasing customer demand for independent and universal digital currency transactions.”

Regulation and security

Headwinds from sceptical governments and central banks will continue to dog Bitcoin, as recent actions by China show.

The Chinese government prohibited banking institutions from processing the digital currency, leading to a ban on its use on Alibaba.com’s E-commerce websites.

Singapore does not recognize Bitcoin as a currency but allows its use provided it is taxed as just another product, service or investment asset.

Susquehanna note that Norway mooted the use of Bitcoin as an asset but not as real money.

They also observe that the Reserve Bank of India issued a cautionary circular on the risks of using Bitcoin.

Aside: Roger Ver’s vision for Bitcoin mining

“I don’t think anyone understands how big this industry will be,” said Roger Ver, ‘angel investor and Bitcoin evangelist,’ at the Miami Bitcoin Conference, held over the weekend.

He was referring to Bitcoin mining, “a market that has huge potential” considering that approximately one million coins could be rewarded over the next year, making it a potentially $1B industry.