While losing Bitcoin can lead to scarcity, on-chain metrics cannot determine its impact on investors.
Data from Glassnode shows, the number of bitcoins lost or held has hit a seven-month high of 7,167,889 BTC, which is 34% of the total supply.
Source: Glassnode
This metric is derived by looking at the movement of large and old wallet addresses. The limitation, however, is that it is impossible to distinguish between held and inaccessible bitcoins.
“A large amount of bitcoins have certainly been lost as they are tied to the unspent output script, but much of it can only be predicted by setting an inactivity threshold after we consider it lost.
The extent depends on a reasonable assessment of investor sentiment and changes in owner behavior. Hence, there are limitations on its use to assess the underlying price drivers and whether Bitcoin is overvalued, undervalued, or at fair value.
Lost Bitcoin refers to the permanent loss of access to a hosted wallet. Since the ledger is immutable and there is no third party who can help, these bitcoins are lost forever in these cases.
Although there are many wallet recovery services out there, it is not known if the lost bitcoins can be recovered. There is also problem with scammers posing as wallet recovery companies.
Millions of dollars in BTC and other cryptocurrencies continue to be lost every year and until then estimate from Cane Island Digital Research, this corresponds to 4% of the available supply.
Chainalysis analysts have done research on Ownership and Trading in June 2020, noting that 3.7 million BTC had been lost by last year, which is 20% of the supply available.
Their analysis is as follows:
Of course, to determine how much bitcoin hasn’t moved in 5 years or more is wrong, it means it will be lost. In this it is possible that the bitcoins in this category are still accessible, but have simply not been moved for 5 years.
Hence, it is not possible to determine exactly how much Bitcoin was lost due to user errors or outliers.
Losing BTC reduces the overall supply. In theory, the loss of Bitcoin would make it tighter and should act as a bullish driver.
Hence, the increasing number of bitcoins held or lost is a good thing for existing holders. However, since it is impossible to separate the amount of BTC held and lost, the extent of the impact on price is debatable.
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Mr. Teacher
According to Cryptoslate
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