Transcription
This is Matthew Crowder's Bitcoin University. Today I want to talk about a salty nocoiner who hates Bitcoin. I'll be going over an essay that someone sent me. It's called "The Bitcoin Fallacy." It's from a blog called "Man on the Margin." It was written by Michael Kendall and published on July 19th of 2025. I'll put a link to it in the description notes below.
But as I was browsing through this blog, I came across one of Michael's previous articles from October 6, 2017. This is called "The Problem with Bitcoin." I went back and looked up the price of Bitcoin, the closing price on October 6, 2017, and found that it was $4,363. Whereas today, Bitcoin's price is approximately $119, $120,000 per coin. This in itself suggests that perhaps there might be something missing from Michael's mental model of Bitcoin. Michael's clearly missing a healthy dose of humility as well, continuing to publish anti-Bitcoin screeds for 8 years while Bitcoin goes up 27x over that period. He's a great example of the quote "often wrong, never in doubt" personality type they should probably seek to avoid in life.
So let's go over this essay paragraph by paragraph. He begins by writing, "The biggest fallacy involved with Bitcoin is that with time it will still grow into a transactional currency." By transactional currency, I mean a currency used for the widespread exchange of goods and services. Now, that's a pretty bold prediction for someone who has been so wrong about Bitcoin for the last eight years, predicting the final end state here, trying to predict the final end state of Bitcoin. Maybe Michael's unaware that Bitcoin actually is already being used as a medium of exchange. In other words, as a transactional currency more and more every year. For example, I accept it on my on my website here. You can pay with Bitcoin. And there's also the Bitcoin map, btcmap.org. I'll put a link to this in the description notes below. And we can see here merchants all around the world who accept Bitcoin for their goods and services.
Michael goes on to write, "In the early Silk Road days of actual sketchy darkpool internet marketplace activity, Bitcoin was used for transactions because its supply was still growing relative to its demand. It had a brief somewhat stable value." No, actually, uh, Michael, the reason that people used Bitcoin on Silk Road wasn't because they were so excited about Bitcoin's fiat price being stable, because Bitcoin's fiat price has never been stable. That's just completely made up. The real reason that people used Bitcoin on Silk Road was because they were buying illegal drugs and credit card companies don't seem to approve of that sort of thing.
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Now, Michael goes on to write, "As supply fell with each halving. So, he basically says there's this mythical time when Bitcoin's fiat price was stable. It wasn't stable. It went from a dollar to $30 back to a dollar in the early days. Uh, so he goes on to to assert, 'As supply fell with each halving and demand grew with its rising popularity and price, Bitcoin transitioned to a speculative asset. The speculative asset trend will never reverse. It will only become more entrenched as long as the Bitcoin system can sustain itself.'"
Now, of course, simply asserting something like this doesn't make it true. And using this phrase "speculative asset" means that Michael thinks that Bitcoin is a bubble, but he doesn't want to say that because it sounds stupid, given that everyone knows that Bitcoin has been going up for 16 years. So instead, he tries to say something smart, calling it a speculative asset. But he realizes there's never been a bubble like this. It never popped. Even the tulip bubble popped after about 3 years. So asserting something doesn't make it true. "Speculative asset," um, it's hard to know exactly what he means by that. And then he goes on to say, "The speculative trend will never reverse unless Bitcoin somehow breaks." Well, that actually sounds like a really strong argument for owning Bitcoin, Michael. Maybe you should pick up some. Michael's basically saying that Bitcoin will pump forever, that it's going to be a speculative asset forever. And I think this is something that he's actually right about for once, because Bitcoin has no top, because fiat has no bottom, as Max Kaiser is fond of saying.
So, Michael goes on, uh, "There's a simple reason that Bitcoin will fail. A currency can't have a fixed supply. It has to expand with growth relative to a monetary standard of reference to maintain stable value." Of course, currencies don't maintain stable value. They lose a lot of purchasing power over time. He seems to ignore that. Never in the thousands of years of monetary history of the developed world has there been a fixed supply currency. It's ridiculous to even consider. The concept is as basic as supply and demand and taught as taught in high school economics that a child had already intuitively learned. In other words, if you like Bitcoin, according to Michael, you're dumber than a high school student, which is pretty ironic since I've known a few high school students over the years who actually did really, really well with their Bitcoin without even needing Michael's amazing historical insights about money.
So when Michael writes, "Never in the thousands of years of monetary history of the developed world has there been a fixed supply currency," 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." And of course, he's publishing this on the internet, which is ironic. So again, maybe Michael needs to update his mental models. He sounds a lot like those guys arguing against Amazon's business model in the 1990s. And also, why is this idea of a fixed supply currency so ridiculous to even consider? Considering all the pain and suffering that an unfixed supply fiat money, unfixed supply fiat monies have caused over the past 50 years. If your currency doesn't have a fixed supply, who gets to decide how much the supply increases every year? This is the problem of human incentives. That's a lot too much. That's much too much power to trust to any human being or committee. Central bankers use the money printer and their uncapped money supply, in other words, their unfixed money supply, to help the federal government fund endless wars and endless waste. So, I wonder if Michael prefers this system where there's someone in charge of adjusting interest rates and the money supply manually.
So, I'd ask Michael, why is it so necessary that the supply of monetary units not be fixed? Especially since 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 the number of coins in circulation, or you can use the final state, or you can use the final state minus the amount that have been lost. But let's just use how many coins have been mined so far: 19.8 million coins times the price of Bitcoin. That's the Bitcoin money supply. And as the price of Bitcoin goes up, the Bitcoin money supply increases and is able to service larger and larger parts of the global economy. When Bitcoin first started and it had a value of a few million dollars, it couldn't even service the economy of a small town. Now it's $2 trillion. It's on its way to being able to service the whole world. As the money supply expands in this very natural way by the price of those monetary movements, uh, the price of those monetary units moving up and down over time, rather than playing around with the number of units, which is what fiat and central bankers do.
And he points out this concept of "is is as basic as supply and demand taught in high school economics." If Michael believes in free markets that are driven by supply and demand, which he appears to be, why does he carve out this exception when it comes to a free market for money itself? This idea that you need to constantly print more money to service a growing economy is Keynesian nonsense. And it grows out of a fraudulent economic theory, Keynesianism, whose sole purpose is to come up with intellectual justifications for money printing and excessive government spending. Keynesianism is economics for big governments that want to have a lot of control. It's basically their propaganda. And MMT, Modern Monetary Theory, just a more modern version of the same sort of intellectual fraud. As Saif points out here, "Bitcoin is a fixed supply. The USD shipcoin has Marxists circling its printing presses. Choose your own adventure." This is Stephanie Kelton of MMT fame posting here. "The carpenter can't run out of inches. The stadium can't run out of points. The airline can't run out of uh frequent flyer miles, and the USA can't run out of dollars." So, she's in favor of printing a lot of money, as you might expect.
And then Saif writes in this post, "My view is that under no circumstances whatsoever can any real-world problem be fixed by increasing the supply of money. Money is a good distinct from all others in that its absolute quantity doesn't matter. Only its purchasing power matters. Increasing the supply of money doesn't increase the utility we derive from money. It just devalues existing money." That's a very, very important point that I think Michael and Stephanie Kelton here both miss. When real-world problems happen, the price of money just goes up or down, and people adjust accordingly. Manipulating the supply on the other hand undermines these signals and the ability of people to adjust. So here's one economist at least arguing in favor of a fixed money supply like Bitcoin.
And then if we continue reading Michael's essay to the end, we can see just how intellectually dishonest he is. So let's go back where we left off. Uh, he writes, "Bitcoin is a fixed supply currency. There there are only 21 million Bitcoin that will ever be mined and probably only around 18 million that will ever actually exist due to early loss when Bitcoin had no value." Um, and that's probably that number is probably correct, maybe even 17 million. Of those 18 million, most are held by governments, Wall Street, Bitcoin treasuries, whales, and Satoshi's unaccounted for stash. There actually a lot of individual smaller holders in there as well. A fraction of the 18 million are actually in circulation, Michael says, and that's probably true. A normal retort is, "Yeah, but there are 2.1 quadrillion satoshis, and businesses like Steak and Shake and others accept Bitcoin." Good for Steak and Shake. It's a smart move for a corporation to vicariously speculate in Bitcoin as long as number goes up. Number go up. But corporate acceptance of Bitcoin will only last as long as number goes up. And in another bare market like the November 2022 FTX collapse, when Bitcoin's price fell from $66,000 to $16,000, that's actually not true. It actually fell from November 2021. It fell over that whole year, and the FTX collapse was part of it. But this wasn't some overnight, uh, overnight problem. Uh, but it did fall from $66,000 to $16,000 per coin. He asserts, "In another bare market like that, no corporate entity will continue to accept Bitcoin." I would say, why not? They'll just have to charge more sats per burger and shake. But I think they'll probably continue to accept Bitcoin. They have, uh, they have all their terminals set up, etc. So again, he's just making something up. And of course, Michael doesn't, uh, appear to run a business of his own.
He goes on to address, at least he doesn't fall for the pizza, the pizza argument, which asserts that Bitcoin has unlimited supply because you can chop it into lots of pieces. Uh, so this, this paragraph from Michael, "that there are 2.1 quadrillion satoshis doesn't result in an expanded supply of Bitcoin that negates Bitcoin's 21 million limit." That's correct. The supply of satoshis doesn't affect the value of Bitcoin any more than the supply of pennies affects the value of the dollar. Each satoshi has the same relative value as a Bitcoin, the same as a penny to a dollar. Which means if Bitcoin goes up a,000%, so would each satoshi go up a,000% in terms of fiat purchasing power.
And then Michael goes on to write about Michael Saylor, calling him the "Pied Piper of Bitcoin," and saying that Saylor predicts a near-term million-dollar price of Bitcoin. "If Saylor proclaims Bitcoin is going to a million dollars, you would be stupid to spend those 8,000, 8,333 satoshis based on one Bitcoin at $120k for a $10 Steak and Shake meal when those same 8,333 satoshis, according to Saylor, are going to increase in value to $83 with Bitcoin at a million." He asserts that no one's going to do this. Again, people are doing it. A lot of people who live on a full Bitcoin standard. What else are you going to use to buy a burger? Of course, you're going to spend some of your money. So this is kind of a silly argument. And then he goes on to assert, "Which is why everyone who buys into the Saylor spiel hodls and would never spend 8,333 satoshis at Steak and Shake or anywhere else. It's also why Bitcoin transaction fees are collapsing. If you can grasp, if you can grasp this simple monetary concept, you can understand why Bitcoin will never act as a transactional currency."
And yet it appears to be acting as a transactional currency. Blocks are full. We're still dealing with this problem of spam, but we're going to have to, and we're going to be able to deal with that, uh, as we bring back the filters and as people wake up and run Bitcoin nodes. But we have full blocks here. Everything's looking good. Bitcoin's transaction fees are extremely volatile. For him to say Bitcoin transaction fees are collapsing, I wouldn't say that's how I would summarize this chart. We did have this huge spam attack in 2024 that we have recovered from, but we can see Bitcoin transaction fees are over, are all over the place since 2017, being very low, being very high, etc. So, I think that's an unfair characterization.
He goes on to say, "If you don't buy into the Saylor spiel, why would you have Bitcoin? Certainly not to buy a meal at Steak and Shake when you can pay with dollars without the hassle of dealing with the mostly criminal, unregulated offshore exchanges." This is where we see that Michael, the author of this essay, is really, really intellectually dishonest. First of all, buying a meal at Steak and Shake using a Lightning wallet is much easier than using a credit card. It's incredibly seamless. So, it's actually easier to spend satoshis at Steak and Shake than to spend dollars. But then when, when Michael characterizes the way you get Bitcoin in 2025, that you have to deal with mostly criminal, unregulated offshore exchanges, he is, uh, just asserting something that's not true. We have so many onshore exchanges from Strike and River and Coinbase, etc. Don't use Coinbase, use one of those other ones. But it's these things are hardly unregulated. They're highly, they're highly regulated. They're not criminal, and they're onshore. So here he's, he's probably writing to slightly older people who don't understand that you can easily get Bitcoin. And that's very, it's a very seamless checkout experience when you spend it.
And then he goes on to write, "As long as the ever-changing rationale for Bitcoin's utility lasts, speculators may profit from it." I would say the rationale for Bitcoin hasn't changed at all over time. It's been talked about as a medium of exchange. It's been talked about as a store of value, etc. And it's really the crypto space. It's, it's currencies, cryptocurrencies like Ethereum that have had to change their story, their narrative a thousand times, being going from world computer to ICO source of ICOs to ultrasound money, and all, all the different marketing that they've tried trying to keep up with Bitcoin. So Michael goes on to write, "But you should at least have some idea of what you're speculating in, etc. The threat to, to the Bitcoin system is Satoshi's fixed supply design." Well, Bitcoin seems to be doing okay for the last 16 years. Uh, so I'm not sure why Michael's asserting this, but he goes on to explain, "Transaction fees were meant to replace mining rewards." That's correct. Over time, there's this transition that requires a functional currency for transactions. Also requires movement on the base layer. The base layer being used as a settlement layer that could provide enough transaction fees to secure it in the same way that Fedwire is able to be secured just through the wiring fees that people pay. And then most people transact at higher layers. So there could be Bitcoin at the base layer. It doesn't necessarily have to be a medium of exchange. And I would say perhaps it doesn't even have to be a medium of exchange. At higher layers, you could perhaps secure the Bitcoin blockchain and generate enough transaction fees just when enough people are using it for cold storage, then moving from one system to another. I personally believe that we do end up as a medium of exchange. But even if Michael's right about this, I think you would still have quite a bit of activity at the base layer. I think he also doesn't understand the difficulty adjustment. Uh, but he writes that, "Requires a functional currency for transactions. That's not only not happening. The transaction fees are collapsing." We just went over that. Obviously, they're moving all over the place, but that's an unfair characterization. "Without transaction fees," Michael goes on to write, "The price of Bitcoin has to keep going up in perpetuity with every halving to sustain the system. That means that the price of Bitcoin will need to approach infinity in 2150 when the mining reward hits zero." Again, he's assuming the conclusion. He's assuming there's not going to be continued activity at the base layer. Uh, that, that result is a reductio ad absurdum, but it points out that the Bitcoin system does not have long-term viability with its current fixed supply protocol.
Now, this is something Satoshi himself was aware of, and he wrote about it. He wrote about it here on February 14th, 2010. He, uh, Satoshi writes in this post, "Otherwise, we couldn't have a finite limit of 21 million coins because there would always need to be some minimum reward for generating, in other words, for mining. In a few decades, when the reward gets too small, the transaction fee will become the main compensation for nodes, namely for mining nodes. I'm sure that in 20 years there will be either very large transaction volume or no volume." So again, if no one's going to use Bitcoin, if no one likes Bitcoin, then it's going to be dead at the base layer, and you will have a problem. But what, what in fact we're seeing is, we're seeing people using Bitcoin, and we're seeing Bitcoin doing better and better year after year. Bitcoin's transaction fees are indeed quite volatile, but it's a free market for transaction fees. And again, I thought Michael liked, uh, I thought he liked free markets.
So that's basically the summary of his essay. Hopefully, you found that useful. There's not going to be a video tomorrow, so hopefully see you on Thursday or Friday with the next video. If you enjoyed this video, be sure to hit the subscribe and like buttons, hit the notification bell if you want to be notified when I publish my next video, and let me know your questions and comments in the comment section below. Thanks a lot for watching, and I'll see you in the next.