“Lost and HODLed” Bitcoin (BTC) reaches 34% of supply, what does this mean?

On-chain market analyst data Glassnode shows that the number of hidden or lost Bitcoin tokens peaked in seven months of 7,167,889.595 BTC. This represents 34% of the total supply.

This metric is derived by examining the movement of large and old reserves. But it has limitations in that it cannot distinguish between stored parts and inaccessible parts.

“Certain coins are certainly lost because they were associated with an exit script that is proven to be unspentable, but the majority of lost coins can only be guessed by setting an inactivity threshold once we consider them to be lost. “

The relevance of this comes down to correctly assessing investor sentiment and changes in saver behavior. Thus, there are downsides to using it to assess fundamental price factors and whether Bitcoin is overvalued, undervalued, or at its fair value.

How many Bitcoin are lost?

Lost Bitcoin refers to the permanent loss of access to a wallet that stores the tokens. Since the ledger is immutable and there is no third party to call for help under these circumstances, the BTC is lost forever.

Although recovery services exist, the jury is still out on whether the lost Bitcoin can be recovered. There is also the problem of crooks masquerading as salvage companies.

Nonetheless, millions of dollars worth of Bitcoin and other cryptocurrencies continue to be lost every year. Cane Island Digital Research estimates that users lose up to 4% of the available supply each year.

Data analysts, Chainalysis, are deepening their June 2020 research on ownership and trading. Last year, their report found that 3.7 million tokens were lost, which is 20% of the available supply.

Their analysis is as follows:

• 11.4 million investments
• 3.7 million as lost (defined as tokens not moved for five years or more)
• 3.5 million as moving between exchanges for trade
• 2.4 million still to be extracted

Of course, defining lost tokens as tokens that won’t budge in five or more years is full of inaccuracies. In this, it is possible that tokens in this category are still accessible but simply have not budged for five years.

However, it is impossible to accurately determine how much Bitcoin has been lost due to user error or unfortunate circumstances.

What is the effect of lost tokens?

The lost Bitcoin will reduce the total supply of the token. In theory, by making BTC even rarer, this will act as an engine of price appreciation.

As such, a growing number of hodled or lost Bitcoin tokens are good for existing hodlers. But because there are no hidden coins and lost coins to divide, the extent to which that is good is a matter of debate.

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