How many of the 1.8 million "lost" Bitcoins have actually disappeared?

977Iti

On April 15th, a Bitcoin wallet that had been dormant for 14 years woke up. The wallet owner sent 50 bitcoins to Coinbase, making a profit of over $3 million from these once-worthless bitcoins. While such transactions are rare, they are not entirely unique. Almost every week, there are instances of early Bitcoin wallets waking up, raising the question: how many speculated lost bitcoins can be brought back into circulation? A new study by Fortune and Chainalysis provides some insights.

Hundreds of thousands of "lost" bitcoins (defined by Chainalysis as bitcoins untouched since 2014) have re-entered circulation in recent years. The chart below shows the net change in the total amount of bitcoins across four different categories of wallets, including those holding fewer than 50 bitcoins and those holding 1,000 bitcoins or more. The "fewer than 50 bitcoins" category represents the vast majority of old Bitcoin wallets.

Nowadays, the number of bitcoins mined daily is less than 10% of what it was at its peak, making early wallets (many of which contain substantial wealth) potentially more intriguing. Those with only occasional interest in cryptocurrencies might be surprised to learn that about 1.75 million Bitcoin wallets have been completely dormant for a decade or longer, many of them containing substantial funds. As of mid-March, these wallets (excluding about 30,000 wallets associated with Bitcoin's creator, Satoshi Nakamoto) contained 1,798,681 bitcoins, now valued at approximately $121 billion.

These 1.8 million "lost" bitcoins represent about 8.5% of the total Bitcoin supply of 21 million (of which 93% has already been mined). In most cases, it is impossible to determine the whereabouts of a particular wallet, but it is certain that many bitcoins have indeed been permanently lost. In the early days of Bitcoin, when the cryptocurrency was nearly worthless, many recipients may have completely forgotten about it or not bothered to save the private keys needed to access the wallet. Until 2012, companies like Coinbase that safeguarded private keys for users did not exist, making lost keys particularly common.

However, not all idle wallets are lost or abandoned. Bitcoin is known for its large "HODLers," who pledge never to sell their reserves (or at least to hold them for the long term). It is these individuals (referred to in crypto terms as "diamond hands") who manage the few active wallets since 2018.

So why do they sell? Chainalysis's analysis of new active wallets found a statistically significant correlation between changes in Bitcoin prices and specific weeks of wallet activity. However, most of the time, the increase in wallet activity appears to be unrelated to significant external events.

Overall, the activation rate of old wallets seems predictable. For example, in the week of March 25th, a typical pattern emerged, with 172 long-dormant wallets becoming active, including 169 wallets containing fewer than 50 bitcoins and one wallet containing more than 1,000 bitcoins. Many Bitcoin holders have more than one wallet, especially those who owned wallets before 2014, so the number of people activating wallets that week may be far lower than 172.

Variable: Satoshi Nakamoto's 1.1 million bitcoins

Chainalysis's survey data suggests that old wallets will continue to awaken at a steady but slow pace until the number of lost bitcoins stabilizes at approximately 1.5 million.

However, we can imagine that the speed of wallet awakenings will accelerate in the future. That is, as HODLers from before 2014 age and bequeath their long-held bitcoins to their children, who then sell them, such scenarios may occur. However, such events may still be decades away, as most early Bitcoin holders are only in their twenties or thirties.

Finally, the above "lost" bitcoins do not include wallets controlled by Satoshi Nakamoto, who is estimated by Chainalysis to own about 1.1 million bitcoins. A recent report by Fortune Magazine on Satoshi Nakamoto's wealth (valued at approximately $75 billion) found that most longtime cryptocurrency enthusiasts believe that the Bitcoin creator has long since become a myth and is very unlikely to ever touch his wallets.

If this is indeed the case, the current number of lost bitcoins is approximately 2.9 million, accounting for nearly 14% of the total supply. In the long run, the best outcome would be for these bitcoins to remain forever undiscovered treasures.

Iravan774

That's alright, now I'm also using this wallet.

Yamini003

I also don't know how many have disappeared.