6 Million Bitcoins Are Lost or Stolen, Could Scarcity Problems Eventually Push Price Higher?

by stockboardasset

At the Building on Bitcoin (Twitter hashtag #BuildingOnBitcoin) conference last week in Lisboa, Portugal, Jameson Lopp, a former engineer at BitGo and engineer at CasaHODL, revealed on stage that 4 million Bitcoins are lost and about 2 million Bitcoins have been stolen.

With 4 million Bitcoins inaccessible and or permanently lost, there could be upwards of 23.5 percent of the coin’s 17,138,938 (as of July 07) supply out of circulation. That means only 13 million Bitcoins could be in circulation today.

Wojtek Palczynski, an IT security consultant who attended the conference, tweeted, “If true the scarcity of Bitcoin is much greater with the total potential supply being only 17,000,0000.”

 

Shortly after the conference, in an unrelated piece, The Wall Street Journal published their conversation with Chainalysis, a cryptocurrency and blockchain analytics company, who stated about a fifth of all bitcoins—around $20 billion worth is no longer accessible due to lost access of cryptocurrency wallets.

It seems like a scarcity narrative could be developing into the second half of 2018. Bitcoin is in a desperate need of a bull thesis after the -70 percent decline from December 2017 high of 19,666. This is the same period where Wall Street unleashed several future contracts on the cryptocurrency.

Chainalysis first revealed this problem in late 2017 in an interview with Fortune that 3.79 million Bitcoins were lost on the Blockchain, as it is clear today — the number is slightly higher.

This estimate, according to the New York-based blockchain firm, specifies that many Bitcoin investors in the early days were “careless” with their PINs.” Now that Bitcoin (Bitstamp exchange) is trading +299,528 percent higher from the 2011 lows, many have flocked to crypto hunters — in the attempt to retrieve their lost fortunes.

If you are experiencing a similar problem of misplaced Bitcoins. The Wall Street Journal describes what services a crypto hunter provides:

Hunter: Wallet Recovery Services,

Hunter: Wallet Recovery Services, an online company that recovers passwords and corrupted cryptocurrency wallets. The firm’s four employees, who are anonymous, communicate with the outside world by email using the pseudonym Dave Bitcoin.

 

Method: “A brute-force attempt at decryption,” Dave Bitcoin said. The firm uses specialized software to generate and test millions of potential passwords, essentially breaking into a client’s digital wallet.

 

Price: 20% of what’s recovered. Dave Bitcoin takes the fee from the recovered currency, then tells the client the password.

 

Time: Months Success Rate: Around 30%, depending on how much information the client has. “They might remember that the password was a seven-character French word with a two-digit number suffix,” Dave Bitcoin said. “This type of information is normally more than sufficient for the recovery of their money.”

 

Biggest Obstacle: Memory. “Many of my customers misunderstand the difficulty of being your own bank, and how hard it is to have processes so that you can remember/preserve passwords and wallets even many years down the track,” Dave Bitcoin said.

Hunter: THE HYPNOTIST,

Hunter: Jason Miller, a hypnotist in Greenville, S.C., who is certified by the International Certification Board of Clinical Hypnotherapists

 

Method: Through hypnosis, Miller helps patients remember their password or the location of their hard drives—much as he’d help them recover a lost wedding ring. “Everybody has a photographic memory,” Miller said. “With skilled hypnotic regression, you can access that photograph.”

 

Price: 0.5 bitcoin upfront, plus 5% of the amount recovered. (Clients either buy more bitcoin or pay from other bitcoin accounts; Miller also accepts Ethereum and litecoin.) Miller never has direct access to the digital currency, “but usually when [clients] find their lost bitcoin, they’re so excited that they have no problem sending the commission on that reward,” he said.

 

Time: Days or weeks for the memory to emerge from the subconscious. Clients typically attend three weekly sessions via Skype. “I’ve also gotten emails two months later saying they finally found where they put it,” Miller said.

 

Biggest Obstacle: Faith. “If someone comes in and tells me they don’t really believe in hypnosis, I say, ‘I hope you find some other way to get into your account because I won’t take your case,’” Miller said.

 

Success Rate: 50% of the cases Miller accepts. He says he gets about a dozen inquiries a year and accepts fewer than half.

Kim Grauer, a senior economist at Chainalysis, said back in 2017 that the blockchain analysis firm does not “help people find lost bitcoin.” Grauer explained that in the long-term, as the fixed supply of Bitcoin hits the 21 million mark, it is possible that an increase in demand could push the price much higher, thus creating a premium.

As for now, it is anyone’s guess where the dual market auction will send price. It seems as crypto bulls are desperately trying to develop a scarcity narrative to influence the next wave of speculators. However, there is one thing obvious, a massive liquidation has formed in the structure of a B-shape distribution on the Y-axis, rotating around a Point of Control of roughly 6,700. Once the distribution is matured, meaning the consolidation is complete — a major imbalance will form. The question that many have: What direction is the next imbalance?

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