Lost, forgotten, or deceased—Is Bitcoin even more "scarce" than we imagine?

The actual circulating supply of bitcoin is far below its set upper limit of 21 million coins. According to analysis, due to forgotten private keys or hardware damage, about 2.3 million to 7.8 million bitcoins have been permanently lost. This "silent deflation" far exceeds the total holdings of all institutions. Satoshi Nakamoto's prophecy is coming true: these lost coins are essentially a donation to all holders, making the remaining bitcoin even rarer and more valuable.

Written by: Long Yue

Source: Wallstreetcn

The supply cap of bitcoin is 21 million coins, but the actual number available for circulation may be far lower than this.

Recently, according to data tracked by "Sound Money Report", estimates from multiple on-chain analysis reports show that due to reasons such as forgotten private keys, hard drive damage, or accidental death of owners, between 2.3 million and 7.8 million bitcoins may have permanently exited circulation. This means that out of the current circulating supply of about 19.9 million coins, the effective number may be as low as 12.1 to 17.6 million coins.

In April 2010, bitcoin creator Satoshi Nakamoto predicted on the BitcoinTalk forum: "Lost bitcoins only make everyone else's coins worth slightly more. Think of it as a donation to everyone." Now, this comment from more than a decade ago is becoming reality on an unprecedented scale.

Irretrievable Digital Wealth

Unlike traditional assets such as stocks or bonds, there is no "report loss and reissue" in the world of bitcoin. The famous saying in the crypto world, "Not your keys, not your coins," often turns into a harsher reality: "No keys, no coins."

Once the private key—a unique 256-bit password—is lost, the corresponding bitcoin becomes a "ghost asset" visible on the blockchain but forever inaccessible. Such cases are not uncommon, for example:

• According to reports, Welsh IT engineer James Howells accidentally discarded a hard drive containing the private key for 8,000 bitcoins in 2013. This asset is now worth nearly $900 million.
• Former Ripple CTO Stefan Thomas forgot the password to an encrypted hard drive containing 7,002 bitcoins. With only 2 out of 10 password attempts left, he fell into endless despair.
• There are also cases where huge fortunes are lost due to accidental death. Gerald Cotten, CEO of Canadian cryptocurrency exchange QuadrigaCX, reportedly died in 2018, resulting in $190 million of client funds (including a large amount of bitcoin) becoming inaccessible.

According to data compiled by Sound Money Report from multiple sources, the estimated range of permanently lost bitcoins is between 2.3 million and 7.8 million coins.

• Ledger, in a report from May 2025, cited analyst estimates that the number of lost coins is between 2.3 million and 3.7 million, accounting for about 11%-18% of the total supply.
• Cane Island Digital analyst Timothy Peterson estimated in a June 2025 report that more than 6 million BTC are irretrievable.
• Blockchain analysis platform Glassnode and ARK Invest, in a 2023 study, estimated that about 7.8 million BTC are in a "hoarded or lost" state, though this figure may be inflated due to the inclusion of long-inactive "hoarding" addresses, accounting for about 39% of total supply (as of September 8, 2025, about 19.9 million bitcoins have been mined).

Although there are differences in statistical methods, these data all point to one fact: there is a large and ever-growing pool of permanently lost bitcoins.

Invisible "Supply Shock": Underestimated Scarcity

This "invisible supply shock" caused by lost bitcoins is much larger in scale than the much-discussed institutional adoption.

As of August 2025, data shows that all spot bitcoin ETFs combined hold about 1.036 million bitcoins. According to statistics from the Bitcoin Treasuries website, the total holdings of the top 100 publicly listed companies worldwide amount to about 988,000 bitcoins, with some well-known companies holding a portion of bitcoin. Adding up the bitcoins held by ETFs and corporations, the total is about 2.2 million.

This means that even with the most conservative estimate of 2.3 million lost coins, the number of bitcoins permanently out of circulation already exceeds the total held by Wall Street and global corporate giants.

While the market's focus remains on how much capital BlackRock's IBIT fund has attracted or how much more bitcoin MicroStrategy has acquired, a much larger and more far-reaching supply squeeze is quietly taking place.

The True Market Cap of Bitcoin May Be Overestimated by About $500 Billion

Based on the current 19.9 million mined bitcoins, subtracting a median estimate of 5 million lost bitcoins, then subtracting the 2.2 million held by institutions, and assuming that long-term individual investors "hoard" about 3.8 million, the actual freely circulating supply of bitcoin available for trading in the market may be only 8.9 million coins, accounting for about 45% of the total mined. In comparison, the free float ratio of S&P 500 constituent stocks is usually between 70%-90%.

Therefore, the current media-reported total bitcoin market cap of over $2.1 trillion actually contains an "illusion." If 5 million "ghost bitcoins" are excluded, its real market cap should be about $1.6 trillion, with about $500 billion evaporating out of thin air.

In summary, the scarcity of bitcoin far exceeds its nominal cap of 21 million coins. This "silent deflation" caused by loss, forgetfulness, and death is continuously reducing the actual supply of bitcoin, with an impact and scale far beyond the scope of mainstream financial media attention.

The market is gradually realizing that it is "scarcer than imagined."