21 Million bitcoins available? It was true before!

We weren’t lied to, but we weren’t told everything either. In this complex universe, one of the most fascinating aspects to observe is the notion of lost bitcoins. With a maximum limit of 21 million units, each BTC lost reinforces the scarcity of the asset, logically influencing its long-term value. This article explores the various methods used to estimate the number of Bitcoin lost and the economic implications of these losses.

Estimation of Lost Bitcoins

Estimating the number of bitcoins lost is a complex exercise due to the anonymity and decentralization of the blockchain.

In fact, they are considered lost when they are no longer accessible by the owners. This most often happens due to forgotten private keys, erroneous transfers or damaged wallets. And the numbers are impressive.

We estimate that between 3.89 and 4.87 million $BTC are lost (18.56% to 23.19% of the 21 million).

It is through these written words that https://twitter.com/_Checkmatey_/status/1755000139490763069 have estimated the number of Bitcoin lost forever.

As a result, they do not Only between 16 and 17 million would remain available. Enough to make this asset even more rare!

Evolution of the number of Bitcoin potentially lost – Source : Glassnode

Typically, analysts use various methods to identify these losses. Analysis of inactive UTXOs and enforcement is one of them.

As a reminder, a UTXO (Unspent Transaction Output) is a technical term for the amount of Bitcoin that a user has received and has not yet spent. After being used in a transaction, these UTXOs are considered spent and can no longer be used again.

Types of Estimated Lost Bitcoins

  1. Reserve permanently lost (0.04%):
    • Includes bitcoins sent to incorrect addresses and unclaimed mining rewards.
    • Estimated quantity: 3,067 BTC.
  2. Reserve probably lost (20.44%):
    • Bitcoins inactive since the opening of the first BTC exchange in July 2010.
    • Estimated quantity: 1.457 million BTC.
  3. Unspent Miner Pool (24.87%):
    • Bitcoins that have never been spent since their creation.
    • Estimated quantity: 1.773 million BTC.
  4. Reserve inactive for more than 7 years (54.64%):
    • Bitcoins inactive for at least 7 years.
    • Estimated quantity: 3.895 million BTC.

These categories, although distinct, may overlap. Indeed, some coins inactive since 2010 may also have never been spent by miners. Analysts take care to adjust the numbers to avoid double counting.

Which places the volume estimates of Bitcoins lost between 2.78 and 3.79 millionand represents approximately 17% to 23% of its total supply.

The image represents a graph of the distribution of bitcoins in the market. Between what remains to be mined and the BTC lost this gives us an image of this distribution.The image represents a graph of the distribution of bitcoins in the market. Between what remains to be mined and the BTC lost this gives us an image of this distribution.
Graphical representation of the distribution of bitcoins on the market – Source : Cointelegraph

Economic impact on bitcoin

The loss of bitcoins irreversibly reduces the available supply. This reinforces its rarity, already limited to 21 million units.

Every bitcoin lost is a bitcoin that will never return to the market, which can theoretically increase the value of the remaining coins. Now if demand remains stable or increases, it may cause prices to rise. This is what we have observed since its creation!

Halvings, which halve miners’ rewards every four years, amplify this effect. Indeed, by slowing down the production of new bitcoins, it consolidates its perception of scarcity among investors.

The image represents the decrease in the production of Bitcoin by miners, over the halvings. Going from 900 BTC during the previous cycle to 450 currently.The image represents the decrease in the production of Bitcoin by miners, over the halvings. Going from 900 BTC during the previous cycle to 450 currently.
Decrease in the production of Bitcoin by miners, over the halvings – Source : Glassnode

This perception of a limited supply due to the loss of Bitcoin encourages holders to hold on to their assets, anticipating an increase in its value, and which reduces liquidity in the market.

Potential investors, attracted by the increasing scarcity of the asset, may be enticed to enter the market with a view to staying for the long term, thereby increasing demand.

The image represents the evolution of the tendency of investors to hold their BTC rather than sell it over the years.The image represents the evolution of the tendency of investors to hold their BTC rather than sell it over the years.
Evolution of the tendency of investors to hold their BTC rather than sell them – Source : Checkonchain

Lost BTC significantly increases the scarcity of the asset, which could potentially increase its value in the long term. This thus reinforces its attractiveness as “digital gold”, solidifying its status as a store of value. In response to this reduction in the number of parts available, investor mindset shifts towards stricter custody of Bitcoin, in anticipation of future valuation. Everything tends to indicate that demand for Bitcoin is likely to grow considerably, attracting those who wish to secure and sustain their investments in an uncertain economic context.

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