Let's discuss the role and meaning of lost Bitcoins on future price actions.

How Many Bitcoins Will There Be?

By my estimate, 30% of all bitcoins mined have been irretrievably lost. This puts the maximum supply of #bitcoin at 14.7 million, with just over 13.4 million available for transactions today.

"There Will Never Be More Than 14 Million Bitcoins"https://t.co/CmiujqkYDS

— Timothy Peterson (@nsquaredmacro) September 24, 2022

The maximum number of Bitcoins is 21 million. But if 30 percent of them are lost, the actual available supply of usable Bitcoins is 21 - (.3 * 21) = 14.7 million.

That estimate is likely in the ballpark. Estimates of lost keys are generally 20 to 30 percent. That would make the final actual available supply 14.7 million to 16.8 million, not 21 million.

How Many Remain to Be Mined?

There were 19,124,681 Bitcoins in existence as of August 2022. That means approximately 1,875,319 are left to be mined.

What Does This Mean?

One way of looking at things is there is less of a chance of a big wave of whale dumping if 30 percent of the coins are lost. Another way of looking at things is that a big percentage of Bitcoin holders are underwater. 

Current estimates are that roughly 50 percent of Bitcoins are below the price people paid. I do not think that takes into consideration lost Bitcoins. If correct, then the percentage of people underwater is much higher than 50 percent. A decent percentage of those underwater are likely to want to sell if they can ever get back to even.

Meanwhile, the number of people who have not heard about Bitcoin has dropped to about zero. In 2012, the pool of people who might eventually become core true believers was much higher than it is today. More importantly, the pool of big money buyers has likely fallen off the cliff. 

Price Set at the Margin  

The price of Bitcoin, like everything else, is set at the margin. And if the big money believers are already in, one whale selling 100 or even 10 Bitcoins will dwarf thousands of buyers of tiny fractions of Bitcoin.

There is a big pool of buyers who don't own Bitcoin. So what? I hear the same silliness about gold. It goes like this: If only X percent of the people who have no gold, buy gold and then the price will go to the moon.

Correct. However, there is no likelihood of that ever happening. The same applies to Bitcoin. And it's important to note that until 21 million Bitcoins are mined, the supply of Bitcoin rises every day. The rate of increase in supply of Bitcoin is shrinking, but supply (minus lost coins) always rises. 

What About Taxes?

The hyped event regarding Colorado was both incorrect and irrelevant. Ohio tried this and it was certainly not worth their effort to do so. Since the transaction is net negative to price, Bitcoin advocates should logically be pleased at the failure of people paying taxes in Bitcoin.

Key Points

• The pool of eligible buyers is constantly shrinking.
• A huge percentage of people will never own either Bitcoin or gold.
• What big money sitting on the sidelines is going to buy Bitcoin? Please don't tell me major central banks because the notion is laughable.
• The pool of big buyers is likely exhausted already. 
• Price volatility makes Bitcoin unusable as money but a very useful speculative plaything.
• Few if anyone will cash out their Bitcoin to pay taxes, buy cars, etc. But when they do, it's net negative for price. New buyers need to be found at the margin when someone cashes out.

Short-term, the Fed is out to crush speculation. Bitcoin has been crushed. It's risen from the ashes before as endless fodder on Twitter shows. But Bitcoin's entire life until recently has been in an environment of ever-increasing liquidity and QE.

Now we have tightening. That will reverse, but when? Meanwhile, the pool of eligible speculators keeps shrinking along with sentiment towards speculation. 

Sentiment towards speculation is being obliterated and that will not reverse on a dime no matter what the alleged advantage of Bitcoin may be. Add it all up, and the message there will only be 14.7 million to 16.8 million is meaningless trivia.

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