34% of total Bitcoin supply is being held or lost forever – Will BTC price rise?
We all know the amount of BTC in the market is finite with the amount of 21,000,000 VND. While the loss of Bitcoins can create scarcity, what will be their real impact on the market and investors
Data from Glassnode shows that the number of Bitcoins lost or held has reached a seven-month high of 7,167,889 BTC, representing 34% of the total supply.
This metric is derived by looking at the movement of large and old wallet addresses. But its limitation is that it cannot distinguish between Bitcoins that are being held and which are permanently inaccessible.
“A large amount of Bitcoin has certainly been lost as they are associated with the non-spent output script, but much of it can only be predicted by setting a threshold of inactivity after they have been inactive. We consider it lost.
The magnitude of this depends on a proper assessment of investor sentiment and changes to holders’ behavior. Therefore, there are limitations to its use to gauge the underlying price drivers and if Bitcoin is overvalued, undervalued, or at fair value.
How many Bitcoins were lost?
Lost Bitcoin refers to the permanent loss of access to a hosted wallet. Since the ledger is immutable and there is no third party to help, in these cases those Bitcoins will be lost forever.
Although there are many wallet recovery services, it is not known whether the lost Bitcoins can be recovered. There is also the problem of scammers posing as wallet recovery companies.
Millions of dollars in BTC and other cryptocurrencies continue to be lost each year, and Cane Island Digital Research estimates that this amounts to 4% of the available supply.
Chainalysis analysts did their research on ownership and transactions in June 2020 and found that as of last year, 3.7 million BTC had been lost, representing 20% of the available supply.
Their analysis is as follows:
- 11.4 million in investment form
- 3.7 million lost (defined as the number of Bitcoins that have not been moved in 5 years or more)
- 3.5 million when moving between exchanges
- 2.4 million untapped
Of course, determining how much Bitcoin hasn’t moved in 5 years or more means lost is incorrect. In it, it is possible that the Bitcoins in this category are still accessible but simply haven’t moved in 5 years.
Therefore, it is not possible to determine exactly how much Bitcoin was lost due to user error or outliers.
What does this mean?
Lost BTC will reduce the total supply. In theory, the loss of Bitcoin would make it more scarce and should act as a bullish driver.
Therefore, the increasing number of Bitcoins held or lost is a good thing for existing holders. But because it is impossible to separate the amount of BTC held and lost, the extent to which it affects the price is a matter of debate.