On Wednesday Bitcoin hovered in a narrow 83k–84k range, the kind of quiet consolidation that gives the tape-watchers little to talk about. Off the chart, a livelier contest was playing out between two economists over whether Bitcoin’s fixed supply is a bug or a feature.

The spark was economist Lawrence H. White’s 2023 book Better Money: Gold, Fiat, or Bitcoin?, one chapter of which argues that Bitcoin’s fixed supply makes it too volatile to serve as a medium of exchange. Saifedean Ammous, author of The Bitcoin Standard, recently published a point-by-point rebuttal. [1]

Point one: the premise that supply elasticity is a virtue does not hold. If a money’s merit came from its ability to expand supply with demand, then copper, iron, and silver should each have beaten gold, since they are easier to ramp up. History did the opposite — those metals were ultimately displaced by gold. Gold won precisely because it is the hardest to issue more of. White’s argument is left to explain why the very trait that made gold superior suddenly becomes a defect when attached to Bitcoin. [2]

Point two lands on demand. Under a fixed supply, Ammous notes, a rise in demand simply bids up the money’s purchasing power; the existing stock is more than enough to carry a larger cash balance, and savers benefit. That a money can be produced at zero cost is itself the flaw — a responsive supply erodes the money’s future store-of-value property, whereas a revaluation response strengthens it. When demand falls, the same logic applies: the money gets cheaper, which invites buying, and supply and demand reconcile through price rather than through miners or industrial consumers rescuing the system. In his view, a monetary system should never depend on those external factors.

Ammous also turns back a hidden premise in White’s case: that gold’s industrial and jewelry demand help stabilize its monetary value. His counter is that non-monetary demand injects uncertainty unrelated to monetary demand — technological change, substitutes, business cycles — that only makes the money’s value less predictable. Borrowing the opponent’s weapon, he cites Mises’s Theory of Money and Credit, chapter 13, noting that the industrial/mining fluctuations of gold and silver are a defect worth considering, merely a smaller one than government intervention. The ideal money, in short, is a pure money: predictable supply, no industrial-use competition. Bitcoin, with no industrial demand and no issuer, sits closer to that ideal than gold does.

Point three is the most persuasive, and it is data. Over the past 25 years, the above-ground gold stock grew about 1.7% per year on average. In the 1970s, gold ran from $35 to $800 — roughly a 20x rise — while annual supply growth averaged 1.34%. In the 1980s, gold fell from $800 to $380, and annual supply growth averaged 1.39%. A 20x gain and a halving, yet the supply-growth rates were nearly identical (1.34% vs 1.39%), which tells you supply barely reacts to price. Ammous also cites the empirical literature on gold’s supply elasticity: studies either find no effect, an extremely weak one, or an effect lagged by years to decades.

White had also written that Bitcoin’s market cap grew for years without its volatility falling. Ammous argues that claim is now hard to sustain. He lays out several strands of evidence: Fidelity has documented Bitcoin’s realized volatility trending lower over the long run; one researcher computes that Bitcoin’s 252-day realized volatility has fallen to 1.52x that of gold; and other papers show Bitcoin’s bid-ask spread narrowing, with price-impact and liquidity-shortfall measures improving, and volatility shocks biting less and recovering faster. [3]

He offers an analogy: crediting gold’s monetary rank to its almost-imperceptible supply elasticity is like crediting Bolt’s 100m win to the fact that he slowed down before the line. He won because he was fastest, not because he decelerated. Build a Bolt who doesn’t decelerate and he beats the real one.

On payment and monetization. Some say Bitcoin isn’t widely used for payments, so it can’t be said to be monetizing. Ammous’s reply: holding Bitcoin is using it as money; accumulating savings is exactly the stage where an emerging money builds liquidity. Bitcoin is still only about 1% of global cash balances; demanding it pay widely before we call it money puts the cart before the horse. The Tesla comparison — a stock that rises doesn’t become money — misses that a stock’s value depends on the firm’s profits, management, competition, and issuance decisions, and the firm can dilute on demand, whereas Bitcoin has no issuer. As for the popularity of dollar stablecoins, in his framing they are merely a new form of fiat demand deposit; their transaction volume belongs to the fiat network, which is far larger than Bitcoin’s to begin with. [1]

Reading the exchange, the striking part is that both sides accept the same premise: money is first and foremost a store of value. They differ on exactly one question — whether supply should respond to demand. In the fiat era that question was never asked, because the answer was always “issue more.” Bitcoin overturned the default answer, and only then did the argument truly begin.

As for Bitcoin’s still-large volatility today, Ammous’s answer is that the transition from new asset to global money necessarily brings large appreciation and price discovery; once mature, appreciation slows and steadies, tracking economic growth rather than a rush to acquire monetary demand. The transition’s volatility cannot be used to describe the destination.

In the end, Ammous’s ideal money is a pure money: predictable supply, no industrial demand, no issuer. Bitcoin is closer to that ideal than gold. And the most lethal blow in his entire rebuttal is the one that uses White’s own premise against him: since gold’s finest monetary trait is precisely that its stock is so hard to expand, why would removing the last sliver of dilutability become a defect?

References

  • [1] Lawrence H. White, Better Money: Gold, Fiat, or Bitcoin? (Cambridge University Press, 2023) — the book whose Bitcoin chapter Ammous rebuts. A detailed discussion of White’s thesis is at the Library of Economics and Liberty: In Search of Stable Money.
  • [2] Saifedean Ammous, The Bitcoin Standard: The Decentralized Alternative to Central Banking (2018) — the source of Ammous’s “hard money” frame. Background: The Bitcoin Standard (Wikipedia).
  • [3] Reporting on Ammous’s volatility-compression argument — Bitcoin’s worst bear-market drawdowns shrinking from ~87% to ~77% to ~54%, which he calls the most bullish development in the asset: Bitcoin’s Worst Crashes Kept Shrinking.