FSU expert sees Bitcoin as continued alternative investment but no future rival to Visa, Mastercard

Over a decade or so, Bitcoin has grown from a shadowy novelty that sparked questions about the future of money into a blockbuster digital investment that inspires daily financial news headlines.

Virtually every day features a new crypto prediction. Late Thursday, the market value of Bitcoin stood at around $36,000 after rising and plunging following news of an interest rate hike from the Federal Reserve. Other recent reports include a prominent trader who predicts a major price fall for Bitcoin and the chief executive of a major cryptocurrency exchange who sees a significant influx of cryptocurrency users in the coming decade.

Guangzhi Shang, a cryptocurrency expert in Florida State University's College of Business, offers no prediction on the value or use of Bitcoin, but he doesn't see it soon rivaling credit and debit cards in everyday purchases.

"There's no way Bitcoin's going to be a threat to Visa or Mastercard as a payment-processing method," said Shang, the Jim Moran Associate Professor of Business Administration.

Shang is available to comment on Bitcoin and other cryptocurrencies as well as the blockchains, or databases, that provide security and transparency and drive their value. His most recent research on cryptocurrency has focused on estimating the supply-demand system of Bitcoin's transaction-fee market and providing a user-friendly tool for fee recommendations.

"There's no way Bitcoin is going to overtake Starbucks' payment-processing system," he said.

Shang cites the throughput of Bitcoin's network, which can process about 10 transactions per second, even with the recent implementation of a protocol upgrade known as SegWit. That pales in comparison with customer demand at Starbucks, which processes perhaps hundreds of transactions per second, he said.

"Because of that capacity limitation and unpredictable transaction fees, I don't think Bitcoin is ever going to be a consumer-to-business payment mechanism," Shang said, "So if you're buying a product that's a fairly small value, say a Starbucks drink, and you want to pay through Bitcoin, it doesn't make any sense."

Yet he sees Bitcoin and other cryptocurrencies such as Ether as strong alternative assets for investors who aim to diversify their portfolios. That explains their domination of headlines before and after the Federal Reserve increased interest rates by a half a percentage point on Wednesday.

"I do see Bitcoin as an alternative asset class that can be very useful for financial institutions as well as the investment arms of regular organizations or companies," he said.

Associate Professor Guangzhi Shang continues his research on consumer returns management and service labor issues, plus on cutting-edge topics such as cryptocurrency, blockchain technology, crowdsourcing platforms, sports analytics and new revenue management technologies. To arrange an interview, email gshang@business.fsu.edu.