How Much Bitcoin Has Been Lost Forever?

Bitcoin has a market cap of $398B and remains the top cryptocurrency. Interestingly, almost four million bitcoins can be lost forever. A report by blockchain analytics firm Chainalysis estimated that between 2.78 and 3.79 million bitcoins were lost – as much as 23% of bitcoins in circulation today could have been lost for good. Of the existing 18.5 million bitcoins, about 20 percent — worth about $140 billion at this point — appear to be in lost or otherwise locked wallets.

Despite bitcoin being designed with a limited supply of 21 million coins, Cane Island Digital Research estimates that only a maximum of 14 million bitcoins will ever circulate due to how quickly coins are lost.

21 million bitcoins

Once 21 million bitcoins are mined, that’s all there will ever be, and more than 18.89 million of the total supply has been mined in the 12 years since it was released in 2009. That’s from the total of nearly 19 million in circulation today, and a maximum supply of 21 million coins when bitcoin is fully mined.

That means that over the next couple of decades, the new bitcoins created by mining will only account for 14% of the market capitalization in circulation, which will amount to less than 3 million.

The cap means that, barring radical changes to the mechanism for supplying bitcoin, there will never be more than 21 million BTC in circulation. Despite being mined, since a significant portion of the circulating supply has been lost to mining, the real number of BTC available for use or exchange is far less than the circulating supply suggests.

Given the estimated 20% of bitcoins ($150 billion) lost permanently, the actual amount of available BTC is far Lower than the total offer.

Good news for investors

Based on the above estimates and calculations, we can conclude that 3.61 million BTC are currently lost, representing one fifth of the supply. At the same time, the losses bring bitcoin’s ultimate limited supply down to 17.39 million, which could be good news for bitcoin holders. There are only about two million remaining bitcoins left to mine, and 3.7 million lost coins could increase as a share of the total available supply.

Through research into production times, it is estimated that around 3.61 million bitcoins were permanently lost in the form of dead coins. The implications of this amount of lost coins are potentially huge for the cryptocurrency’s price. Millions of dollars worth of bitcoin, as well as other digital assets, are lost every year. Depending on how the bitcoin price compares to the dollar, media outlets have reported losses of billions to tens of billions of bitcoins for good.

Bitcoin: say goodbye to $100 billion

In fact, it’s estimated that over $100 billion in bitcoins have been lost — but at least one company says some may have been recovered. Although no one knows the exact number, an estimated one-fifth of bitcoins mined were lost, mostly because investors lost private keys.

A recent study says that a significant number of bitcoins were lost due to lost private keys, representing an interval between 68,110 and 92,855 recoverable bitcoins – or between $3.6 billion and $4.2 billion.

Bitcoins can also be lost when the bitcoin owner dies without sharing their private keys, or making sure the private keys are traceable by the intended beneficiaries. Self-storage puts the responsibility for security and risk of loss on the user; if the user takes complete self-custody of their bitcoins and loses their private keys, the bitcoins are permanently lost.

Just as fiat currency notes can be accidentally damaged and lost while being stored and circulated, bitcoin private keys can be lost.

What is my password?

Lost bitcoins are still stored on the blockchain like any other bitcoin, but the lost coins are permanently dormant, as there is no way for anyone to ever find the private keys that allow them to be used again.

Today there is talk of how up to 20% of bitcoins supply could be lost forever because account holders can’t remember their passwords. Bitcoin users routinely misplace or forget passwords, analysis from The Wall Street Journal suggests, and unlike fiat currencies, which can be recovered, these lost tokens are extremely unlikely to be returned to circulation.

Blockchain analytics firms used their exact methods to determine that none of the bitcoins mined in 2017 were lost, and of the BTC used in strategic investments and buying/selling, only about 4 percent were permanently lost.

Final thoughts

Blockchain analytics companies believe that Satoshi’s original coin, a million coins worth, has been lost for quite some time, and between 30-50 percent of those Bitcoins that haven’t moved in the last couple of years are also missing.

According to a June 2020 report by Chainalysis, around 3.7 million BTC have been sitting untapped for at least half a decade – this is about $40.6 billion worth of Bitcoins that may never move again. And that’s just bitcoin: An estimated 12,000 Ethereum were reported lost since 2018.

The supply of bitcoin is set to grow by less than 2 percent starting with the next halving in 2024, and eventually fall to less than 1 percent per year after the next block reward halving.

I write about blockchain, crypto, NFT and other disruptive technologies and innovations.