It’s instructive to occasionally look under the hood of bitcoin promotion and see what’s going on there. I got that opportunity when my last post, The Bitcoin Fallacy, made its way to Bitcoin University.
Matthew Kratter runs Bitcoin University. He deconstructed my post paragraph by paragraph in a video on his YouTube channel and not surprisingly in his salty bitcoin centric view, found it—lacking.
Mr. Kratter appears to be a prolific creator of all things Bitcoin videos. His YouTube video index goes on far longer than I care to scroll. He narrates his videos with a very calm, Mr. Rogers-like tonal delivery, which likely has the same effect on his viewers that Mr. Rogers had on his.
I listened to Mr. Kratter’s video presentation which he titled Salty No-Coiner Hates Bitcoin, and found the quality and substance of Mr. Kratter’s critique—lacking.
The Fallacy of Bitcoin, The Problem with Bitcoin, and every other post I’ve written on Bitcoin not related to crypto fraud, deal with the vulnerability to bitcoin’s long-term sustainability due to its fixed supply. Apparently in the bitcoin world, that means I’m automatically a Keynesian/MMT/fiat proponent. Which is exactly what Mr. Kratter asserts.
That is a lazy strawman argument that gets rolled out for anyone who critiques bitcoin. I don’t criticize Mr. Kratter for not spending the time to actually understand my monetary orientation, but I do find it intellectually dishonest for him to imply what he doesn’t know. It would take Mr. Kratter about 30 seconds to scroll through my archive titles to figure out I’m a classical gold standard advocate for a return to stable money. I’m as far away from the Keynesian and MMT economic school of thought as Tether is from an audit.
Where Mr. Kratter seriously goes off the rails is his explanation of money supply. The definition of money supply is universally accepted. It’s the amount of currency that exists that is not permanently out of circulation. The money supply of gold is all the above ground gold that’s been mined. Dollar money supply is base money controlled by the Fed. Bitcoin money supply is all the bitcoins ever mined minus bitcoins permanently lost. Mr. Kratter reinvents the definition of money supply for bitcoin, presumably to get around the glaringly obvious fact that it has fixed supply. Using 19.8 million bitcoins for educational purposes, he states:
…a fixed supply money like bitcoin can very naturally and organically expand its money supply by the price of those monetary units moving up and down in response to market demand. For example, the bitcoin money supply you calculate by 19.8 million coins times the price of bitcoin. That’s the bitcoin money supply.
No, that’s bitcoin’s market capitalization. Bitcoin’s money supply refers to the total number of bitcoins in circulation, which is capped at a maximum of 21 million coins. According to Coinbase, “For a cryptocurrency like Bitcoin, market capitalization (or market cap) is the total value of all the coins that have been mined. It’s calculated by multiplying the number of coins in circulation by the current market price of a single coin.”
I don’t know why Mr. Kratter attempts this economic legerdemain. It makes suspect his grasp of basic economics. He really shouldn’t bother with erroneous definitions of money supply. Most bitcoin advocates are fine with its fixed supply and see it as a feature, not a bug
To my statement, “Never in the thousands years monetary history of the developed world has there been a fixed supply currency,” he says:
I would respond also over those thousands of years, we didn’t have the internet or semiconductor chips or ECDSA or SHA 256 or other cryptographic functions that might make digital fixed supply currency feasible. We’re living in a new age as he might have noticed if he looks around.
I looked around and noticed that Mr. Kratter previously stated that bitcoin’s supply organically grows. Yet, he also quotes Saifedean Ammous who categorically states bitcoin has fixed supply. Mr. Kratter waffles and says that technology “might make digital fixed supply currency feasible.” Which is it–bitcoin’s supply organically grows, bitcoin’s supply is fixed, a digital fixed supply currency might be feasible? Mr. Kratter needs to sit in the corner with a pointy hat, contemplate his contradictions, and make up his mind once and for all. He’s got a university that wants to know.
To my point that transaction fees have collapsed he displays a chart that shows…transaction fees collapsing. I assume his point is that since fees previously trended all over the place, the same will occur in the future. Time will tell who is right on that argument.
Mr. Kratter tosses out Lightning as a quick transaction aside, but doesn’t distinguish between centralized Lightning and the decentralized Bitcoin protocol. I would refer anyone who thinks Lightning is the answer to bitcoin’s failure to act as a transactional currency to the Lightning chapter in Roger Ver’s, Hijacking Bitcoin.
The overall summation of his critique is that bitcoin has been around for 16 years and number go up, so there. QED. He notes that I wrote The Problem with Bitcoin in October 2017 when bitcoin was $4,363 and today it is $119,000. In his mind, that 27X gain over 8 long years disproves what thousands of years of monetary history has definitively recorded. A fixed supply currency has never existed in a major economy and never will.
Great reply. Made me laugh…I could not help thinking that perhaps Mr. Kratter might also have a supply of rare Dutch tulips is his back yard.