The Bitcoin supply has only been inflating at consistently lower rates (e.g., ⅟ₙ₊₁ after 𝑛 blocks when the Bitcoin block reward was fifty bitcoins), so a progressive reduction in spending would seem to be expected under the economic theory.
The theory applies to monetary systems (macro) not some small gambling party.
Krugman was saying Bitcoin could NEVER work as a monetary system because it's designed to be deflationary. I.e. People would hoard instead of spend
It inflates initially; however, that inflation decreases to nothing over time (and, in fact, becomes deflation as the rate whereat coins are lost or made unspendable overtakes their production).