Bitcoin Number in fact check: How many BTCs are lost forever?
We all know the following story: Satoshi Nakamoto published the Bitcoin Whitepaper on 31.10.2008 and created the Bitcoin Genesis block (first block) on 03.01.2009. He limited the maximum number of Bitcoin in the BTC source code to 21 million. To date, a total of approximately 17,800,000 BTCs have been created and circulated. One question comes up again and again in this context: are all these Bitcoins really still available or have some already been lost in the meantime? In this article I would like to get to the bottom of this question and use statistics and graphics to explain how many Bitcoins are actually in circulation.
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Lost many Bitcoins in the initial period
It is often said that many Bitcoins have been lost in the last 10 years. Especially in the early days of Bitcoin. When BTC still had a fraction of today’s value and there were no “nice” wallet solutions, there were probably the most losses, because old hard disks were disposed of, USB sticks relocated or paper wallets lost.
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This means that many investors and miners of the early days may have lost their private keys and thus (forever) no longer have access to their Bitcoin. Without a private key, the Bitcoin can never be retrieved again and thus enter the eternal hunting grounds of the BTC blockchain. The statements about the actual number of available Bitcoin differ, however, sometimes very strongly. So the question arises: Which possibilities are there to determine the exact number?
Bitcoin’s UTXO Age Chart as basis
The Bitcoin Blockchain is rich in information that is completely transparent to everyone. However, it is impossible to say which BTCs are actually lost and which are not. The Bitcoin blockchain does not contain this information. However, the transaction timestamps of all BTCs are available and can provide information about how many Bitcoin have actually been lost.
For the calculation I use the Bitcoin UTXO Age Distribution Chart. UTXO means “Unspend Transaction Output” and indicates when the last transaction of a Bitcoin took place. This allows you to determine exactly how many BTCs were “dormant” for how long. In other words: when they were last moved.
The UTXO chart shows various data. On the left side of the y-axis you can see the share of all Bitcoin in circulation, on the right side the respective Bitcoin price in USD and in the lower area the time span. In addition, the entire chart is displayed in different colors, each of which represents the time since the last movement. The warm colours show the recent transactions and the colder colours the bit coins, which have not been moved for some time. A colour legend can also be found on the left.
UTXO age bands are like geological strata: Evidence for Bitcoin that was preserved some time ago is buried under layers of recent transactions. To distinguish lost BTCs from those still under someone’s control, subtle data must be found from the oldest layers of the block chain.
Bitcoin losses are divided into 2 categories
Experts distinguish the losses of the BTC in two different phases:
- Systemic losses: a large number of BTCs that were mined and lost in the first days of Bitcoin by Satoshi and the other first miners together.
- Incremental loss: BTCs that are gradually lost by individual users over different periods of time.
The era of systemic loss thus seems to be long over. Miners have known for some time how valuable BTC are and will be. Therefore, all precautions are taken by the miners to avoid the possible loss of private keys. After all, it is now a high-turnover industry and a real business. But what happened in the early days of Bitcoin? In short: almost nothing. There were hardly any transactions at that time, the Bitcoin had no value and the world knew nothing about the aspiring Crypto-Star.
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Nevertheless, many blocks were removed in 2009. Over 5 million BTC were produced in this time by Satoshi and the first miners until 2011. This is more than 23% of the total BTC that will ever exist. Many of them are already declared “lost forever”. Satoshi’s wallets have also remained untouched so far. Here alone there are estimates of more than 1.9 million BTC that could be lost forever. These take also 2/3 of the Bitcoin, which were not moved for more than 5 years any more.
Lost Bitcoin that are “older” than 5 years
We know that until today there have been several peaks where the Bitcoin price has experienced an extreme price increase. In 2011 it went from $1 to $33, in 2013 from just under $100 to over $1,000 and in 2017 from $1,000 to up to $20,000. As soon as the BTC price moves upwards, “old” Bitcoin also start to “move” again. Is Bitcoin better than gold? Similarities and Differences between Bitcoin and Gold.
This is because many speculate on a price increase and leave their Bitcoin untouched until then (greetings to the Hodlers). This can also be seen in the following diagram. As soon as the Bitcoin price has reached its respective high, more Bitcoin are moved again. Probably to sell them profitably on the market.
Over 4.85 million Bitcoin lost forever
But back to the actual question. How can we now deduce from this information how many Bitcoin have been lost forever? First of all: It is impossible to determine this exactly. However, based on the UTXO age distribution shown above, we can give a qualitative estimate.
The chart clearly shows that the number of bitcoins in 2017 that have not been moved for 3-5 years is declining rapidly. Which is probably due to the strong price increase. But the number of Bitcoins that have not been moved for more than 5 years is almost unchanged.
Currently, 21.5% of all Bitcoin are in the blue range (not moved for more than 5 years) and 5.8% in the light blue range (not moved for 3-5 years). Converted to the current number of all Bitcoin in circulation in the amount of 17.8 million, this results:
- 21.5% * 17.8 million = 3.827 million
- 5.8% * 17.8 million = 1.032 million
So we can strongly assume that all Bitcoin that have not been moved for more than 5 years will be lost forever. Because with the two peaks in 2013 and 2017 one would have moved at the latest the BTC to sell these (which also many have done). In the light blue area the situation is hardly any different. These are the BTCs that were moved 2014-2016 for the last time. They should have moved again by 2017 at the latest, as the Bitcoin price rose 20-fold in 2017.
It is impossible to predict exactly how many Bitcoin have been lost forever. But the UTXO Age analysis brings us closer to the answer. However, it is not a guarantee and should only give a rough overview of the possible number of lost BTCs. A total of 4,859,000 BTC could be lost forever. That would currently be 27.3% of all BTCs in circulation and 23.1% of the maximum number.
If this calculation is correct and we have just under 1/4 less BTC in circulation, then the market capitalisation would also have to be reduced. Market capitalization is calculated by multiplying the number by the price.
I am not saying that the Bitcoin price is therefore undervalued, but an alternative calculation of the market capitalization of BTC could actually be considered here. In addition, more private keys will surely disappear in the next few years and more BTC will be lost forever. But as long as the exact number cannot be calculated, the pure wishful thinking remains.
In the next article I will use the UTXO data to show when new Bitcoin HODL waves form and whether we are already in one. Stay Tuned.