Wright Buys More Time: But Does His Testimony Hurt Or Boost Bitcoin?

Imagine for a moment that Craig Wright truly is who he says he is; the inventor of Bitcoin. Imagine you are one of the few who, despite the evidence against his many rambling arguments, believe he truly is the creator of this revolutionary monetary system, now rejected by its creator because it has been used for “bad things”.

Now, the creator reveals, he has no access to the million-plus bitcoins that he says he mined back in the early days with Dave Kleiman. Placed in a “Tulip Trust” for safekeeping and encrypted with a complex algorithm that requires the collection of distributed keys for decryption, it’s possible, Wright admits, that these bitcoins could be forever lost.

This explanation of the unattainable early bitcoins offers Wright an escape from the responsibility of turning over any of the supposed fortune to the plaintiff in his ongoing court case, but creates its own set of quandaries.

In particular, a certain issue of inconsistency with past accounts emerges. If Craig Wright truly had no access to these early bitcoins, yet he allegedly demonstrated signing with the keys to Gavin Andresen and Calvin Ayre (among others) then he either:

1. … was not telling the truth in his tearful testimony in court… 
2. … duped those who witnessed a fake signing…
3. … collaborated with the witnesses to fabricate the signing incident…
4. …WAS telling the truth – but very specifically, in the present tense.

Serious question. If CSW has now claimed in court that he has no access to early mined bitcoin keys, is he not then publicly admitting that he committed fraud when he 'demonstrated' signing to Gavin and others?

I wonder what Gavin and his other believers have to say about this? pic.twitter.com/GDhp9HPhAA

— jratcliff63367 (@jratcliff) June 29, 2019

A bigger story is percolating under the surface here, one of Bitcoin’s supply and demand dynamics.

Whether Wright cannot access these million-some bitcoins due to his version of events or because of some other explanation, the reality is simple: this large sum of bitcoins, worth about $10 billion, appears to be inaccessible right now.

So the supply of available bitcoins, with this large portion of the entire supply locked up, has been severely constricted – at least according to Wright’s own sworn testimony. If one is to believe Wright, one might look at this as a pretty good reason to snap up some more of the (now much scarcer) remaining bitcoins.

It’s well-known that the supply can never exceed a total of 21 million bitcoins – and next year’s halving event will squeeze the supply even more.

Over the years, it is thought that millions of BTC have been lost, most of these back in the time when they weren’t worth a whole lot. It has been estimated that somewhere around 4 million BTC may well be lost forever, due to events such as holders passing away or keys being lost, even being casually thrown out on old hard drives of lousy computers that were due for an upgrade.

This reduces the available supply of Bitcoin considerably, but a jump of an additional ‘missing million’ causes said supply to take an instant hit, increasing scarcity significantly.

Importantly, this may also allay fears of Wright’s threats to dump a mass quantity of BTC, as happened during the BCHABC versus BSV hash war, flooding the market with cheap bitcoins and causing a severe crash. Another such supply glut could send the market reeling to lows not seen in years. 

On the other hand, it is possible that such a catastrophic event could take place, assuming Wright is truthful in his explanation that the trust is set to be turned over to him on January 1, 2020. How this can be turned over to Wright if certain keys are inaccessible remains to be seen.

As is so often the case with Mr. Wright, the deferment of proof leaves open the hint of uncertainty. Semantics are a powerful weapon when deployed skillfully in court; it is absolutely tenable to claim that one has no access to something, while being fully aware that one might eventually have access to it — all without committing perjury.

Carolina Bolado, covering the trial for Law360 in Florida, specifically noted that “He [Wright] says he just can’t get this information, and that public addresses wouldn’t provide the plaintiff in this $10B suit against him with anything relevant.”

We may infer that a professional court reporter would appreciate the fine distinction between past and future tenses here.

For now, it seems the strongest advocate for the increasing value of BTC may be Wright himself, due to his efforts to prove his inability to access 1.1 million bitcoins.

If Wright will never be able to access that fortune, the supply of available bitcoins just took a serious hit, dropping the market’s supply considerably. This is concurrent with a number of large-scale investors entering the fray; and that could result in an unprecedented supply crunch that sees market values move in a positive direction.

But if Wright somehow comes into a million or so bitcoins in January 2020? And given his predilection for unpredictability, not to mention previous threats and recent expressions of regret?

While this saga continues, we might surmise that risk-averse investors are likely to stay on the sidelines. Research by Delphi suggests that up to 20% of all bitcoins may be gone forever (around 3.79 million lost). DIAR thinks that only around 38% of the existing bitcoin supply exists outside of exchanges and custodial-sized firms (around 6.76 million). If those estimates are true, there could be as few as 7.4 million bitcoins making the rounds these days (17.9 million minted, minus these two figures).

So what’s an extra 1.1 million between friends? A supply glut of ~13.5% resulting (one would expect in traditional economics) in a decrease in the equilibrium price of the underlying asset.

Oh, Craig.

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