New Delhi: Bitcoin investors are likely to lose up to $545 million this year, owing to various reasons like forgetting passwords to their wallets or making a mistake in recording their “seed phrases”, according to a new report.
A seed phrase is a series of words generated by your cryptocurrency wallet that give you access to the crypto associated with that wallet.
Analysts have estimated that at least 20 per cent of all Bitcoin is lost and that the majority of those funds are irretrievably lost.
According to new research from CryptoAssetRecovery.com, between $272 million to $545 million of Bitcoin will be lost this year.
“Crypto gets lost for a host of reasons: People forget the passwords to their wallets; people make a mistake in recording their seed phrases and some die without giving adequate instructions for how to access their funds,” according to the report.
“However, this does not include Bitcoin lost to scams or theft.
“While such funds are lost to the original wallet holder, they are not lost to the total money supply of Bitcoin. Those funds will likely continue to circulate,” the report noted.
People also unintentionally (or occasionally intentionally) send crypto to a burn address, or to an address on a different network, and lose it.
A new Bitcoin block reward is issued every 10 minutes, and in 2022, the block reward is 6.25 Bitcoin. The block reward will halve again in 2024, to 3.125 BTC/ block reward.
“Since there are 525,600 minutes in a year, and a block reward is issued every 10 minutes, 52,560 block rewards or 328,500 BTC will be issued in 2022,” the report noted.
“It’s clear that the vast majority of the approximately 3.8 million lost Bitcoin were lost early in the blockchain’s history, before it had any economic value.
Given that between 2-4 per cent of the 328,500 Bitcoin mined in 2022 is likely to get lost, somewhere between 6,570-13,140 Bitcoin are likely to get lost.
“When Bitcoin’s price is approximately $41,500, this means that between $272 million and $545 million in Bitcoin alone is likely to be removed from the Bitcoin money supply in 2022,” the report claimed.
Bitcoin’s price on Wednesday fell below $40,000 as other major cryptocurrencies were trading in the red, according to Coindesk data.