Nick Colas, chief market strategist at ConvergEx, was one of the early Wall Street analysts to take a serious look at bitcoin back in February. To wrap up 2013, he examined what he sees as 11 myths surrounding the subject.

Debate raged over bitcoin's legitimacy: Was it just a playful creation of hobbyists, or a new exchange medium brought about as a logical reaction to profligate currency manipulation from the world's central banks?

While there were plenty of other big surprises in 2013, no business story likely was more unique than bitcoin, the online simulated currency that threatened to shake up the global monetary system.

1. Bitcoin is huge

For all the talk and hype, bitcoin is tiny with a total value of just $10.8 billion. That compares to the total stock of U.S. dollar at $800 billion, Colas said in a report. There's also about $4 trillion in global currency traded every day.

(Read more: What you need to know about digital currencies)

2. Bitcoin enables drugs and terrorism

Colas argues that bitcoin is "way too volatile" for the average drug dealer or terrorist. That's not to say that "some enterprising dealers" don't use it, but if it was widespread Colas contends its value would be "$10,000 or higher" compared to Friday morning's trading value of about $800.

3. Bitcoin is a currency

This is perhaps the most contentious observation, as bitcoin is often referred to as a "cryptocurrency." Colas offers that bitcoin is "a system much more than a 'currency'" in which holders agree to take part in a transaction of value.

Banking analyst Dick Bove may have been more to the point, where in a recent analysis he called bitcoin a "low-cost replacement for credit cards and other payment mechanisms." There are virtually no costs involved with bitcoin transactions, as opposed to wire transfers, for instance.

4. Bitcoin has never been more volatile than now

Untrue, according to a chart Colas prepared analyzing bitcoin's one-month returns and standard deviation. It actually was more volatile in May 2011, before most people even had heard of bitcoin.

(Read more: Behind China's love affair with bitcoin)



5. Chinese citizens can't buy bitcoins

BTC China has been one of the most dominant exchanges for bitcoin, with nearly 10 million transactions over the past month, according to bitcoincharts. That's despite a government ban on financial institutions handling such transactions.

6. Bitcoin is not a store of value



This is an expression often given to gold and silver, and Colas said it does not apply to bitcoin. "Bitcoin may one day prove it deserves to sit alongside those assets," he said. "It isn't there yet."



7. Bitcoin is untraceable

Bitcoin transactions happen online. Enough said. (Though Colas does offer: "If you think anything you do online is secret, I can't help you.")

8. Losing anonymity will render bitcoin useless

Conversely, traceability doesn't dim bitcoin's allure, which is really in its low or no-cost transactions.

(Read more: Big US online retailer to accept Bitcoin)