We'll here's the thing. Bitcoins are used in transactions. The author's theoretical problem has been discussed from the very beginning. People were raising the exact same issue in 2010 when bitcoins were trading at a nickel...and people went on and bought them and spent them.
I don't know that there's a real academically satisfying response to the complaint. On the one hand, the author raises a serious economic concern (though, he's quite late to the party in raising it): That the deflationary nature of bitcoin will contributes to the system's failure. And on the other hand, there is the following fact: People spend bitcoins.
Agreed, people obviously spend Bitcoin's but as they become more valuable, will they be spent more or less? Isn't it fair to at least question whether the higher the value is, the less you're inclined to spend? Nancarrow makes good points as well but for the interim we mostly do still have disposable income and can hoard. I would say that is true for 95%+ of people who are buying Bitcoin's. Isn't it at least possible that spending could drop drastically as we cross the $500, $1000, $10,000 mark of Bitcoin's?