One of the most compelling justifications for Bitcoin’s value is that its supply is limited to 21 million units. This is correct in the sense that there will never be enough bitcoins to go around, resulting in scarcity and driving up the price of the digital asset. One thing that is rarely acknowledged is the fact that there will never be 21 million BTC available. In fact, there will be far fewer.
BTC Supply Is Decreasing
One thing to keep in mind concerning bitcoins is that they are in short quantity. After the last bitcoin is produced, there will be around 20% less of the total amount in active circulation, rather than 21 million BTC. It is quite likely that there will be less than 18 million BTC in circulation due to a number of factors that have occurred over the previous decades and in the years to come.
There are a variety of reasons for the fall in active circulation. Given that the digital asset is nearly a decade old and was not particularly valued in its early phases, a considerable number of coins have been lost due to circumstances such as individuals forgetting their passwords. This is one of the most common ways for BTC to go dormant.
Others include coin owners dying without informing anyone that they hold the coins or how to access them. Some people have forgotten that they hold the asset, and when they do, they are unable to reclaim the money because their wallets have been deleted from their computers, for example.
Another possibility is that the gadget containing the coins is lost. The most well-known example is the man who unintentionally threw away a USB device carrying around 7,500 BTC. The former IT professional, known as James Howell, is still looking for a means to recover the lost disc.
What Does Bitcoin’s Dwindling Supply Mean?
A shrinking supply, like any other asset, will inevitably lead to a supply squeeze if demand remains constant, and bitcoin is no exception. It’s estimated that 20% of BTC’s supply has been lost and will never be regained. This indicates that of of the 19 million BTC mined, around 3.8 million have already been lost.
As occurrences like the ones mentioned above continue to occur, such as people losing their wallet keys, dying without allowing anybody access, and so on, the BTC supply will continue to shrink, which will benefit the price.
The demand for bitcoin will expand dramatically as more people enter the market. This will raise the cost. With institutional investors putting their money into the digital asset, some of the more outlandish predictions for the asset will start to look more plausible.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.