Bitcoin’s supply is capped at 21 million is one of the leading arguments for how invaluable the digital asset is. This is accurate in the fact that there will never be enough bitcoins to go around, hence causing a scarcity that will continue to drive up the price of the digital asset. One thing that is not mentioned often though is how there will never actually be 21 million BTC in available. There will, in fact, be much less.
Depreciating Supply Of BTC
One thing about the supply of bitcoins is that it remains a diminishing supply. Instead of having 21 million BTC in circulation after the last bitcoin is mined, there will be about 20% less of this total supply in active circulation. Due to a number of things and events that have happened during the course of the past decades and the years to come, it is highly likely that there will be less than 18 million BTC in circulation.
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Reasons for this decline in active circulation range across a number of issues. Given that the digital asset is over a decade old at this point and was not very valuable at the beginning stages, there have been a large number of coins lost to situations such as holders forgetting their passwords. This is easily one of the ways that BTC can go into inactive circulation.
Others include the owners of the coins dying without letting anyone know they own them or how they can access them. Some have forgotten that they own the asset and when they do remember, are unable to recover the coins due to deleting the wallets off their computers, etc.
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Another scenario could be losing the device the coins are stored in. The most popular case of this is the man who had accidentally thrown out a USB drive containing about 7,500 BTC. Till today, the former IT worker identified as James Howell continues to look for ways to try to recover the lost drive.
What Does Dwindling Supply Mean For Bitcoin?
As with any asset, a diminishing supply will inevitably lead to a supply squeeze, provided the demand for that asset is maintained, and bitcoin is no different. It is estimated that 20% of BTC’s supply is already lost to never be recovered. This means that of the mined 19 million BTC, there are about 3.8 million already lost.
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As events similar to the ones stated above continue to happen, ie people forgetting wallet keys, dying without giving access to anyone, etc, the BTC supply will continue to diminish, which would do wonders for the price.
As more people come into the space, the demand for bitcoin will grow exponentially. This will drive up the price. With institutional investors already establishing their places in the digital asset too, some of the outlandish predictions for the asset will start to become more realistic.
Featured image from Bitcoin News, chart from TradingView.com
