Why Bitcoin Could Fail

Mike Green’s recent podcast appearance, “Why Bitcoin could fail” is a characteristically insightful contribution to the debate on digital assets. His central contention is that the very feature often celebrated by crypto advocates as Bitcoin’s strength — its absolute scarcity — may in fact prove to be a fatal weakness. Extending this logic, he argues that Bitcoin exhibits many of the characteristics of a Ponzi scheme.

Green’s most provocative thought experiment is a hypothetical “Bitcoin-dominated world,” in which the cryptocurrency displaces the U.S. dollar as the national currency. His analysis highlights a fundamental point: a modern economy requires a modest degree of inflation to function equitably. By contrast, the “digital gold” hard-money ideal espoused by Bitcoin advocates would embed systemic deflation, accelerate debt defaults, and ultimately risk broad economic collapse.

This reasoning aligns closely with Lethame Capital Management’s own framework, as set out in “Reconsidering Government Deficits: A Balance Sheet View of Fiat Money – Part 1” and “Reconsidering Government Deficits: A Balance Sheet View of Fiat Money – Part 2”.

Government deficits should not be misconstrued as fiscal profligacy; rather they are the mechanism by which net financial wealth enters the private sector. While deficit spending often brings about mild currency depreciation — in effect, controlled inflation — this is not a flaw but a prerequisite for sustaining growth and stability in a modern monetary economy. Absent this dynamic, the system contracts under its own weight.