The cryptocurrency market plummeted in the last few days.
After soaring and delivering profits for investors, people lost more than $100 billion in Bitcoin.
If you lose your Bitcoin, you will never retrieve it back.
Bitcoin is a circulating asset, there are limited coins in the market. There are not lost, but they complete a cycle.
"Unlike fiat currencies like the US dollar, Bitcoin was designed to have a limited supply," said Trezor Blog.
"While more bank notes can always be printed by the Federal Reserve, new bitcoin cannot be issued once all 21 million coins have been mined."
According to Cane Island Digital Research, investors lose 4% of Bitcoin annually.
Reports illustrate that Bitcoin has 21 million coins in existence. Nevertheless, Cane Island Digital Research says that just 14 million coins circulate.
The New York Times published that there are 18.5 million bitcoin mined and estimates that 20% of those coins are lost.
The value of lost or inaccessible Bitcoin is around $140 billion, as the New York Times describes.
How is Bitcoin destroyed?
Generally, people commit mistakes when storing or sending Bitcoin.
The other situation is when Bitcoin is stolen.
"People frequently lose bitcoin due to how they store them. For instance, many people store their bitcoin online on exchanges," said Trezor Blog.
"In doing so, they are relying on the exchange to keep their assets secure. While there are certainly reputable exchanges operating in the world today, there have been a plethora of cases throughout the last decade where exchanges have stolen their users' assets or failed to prevent hackers from doing so."
As a seasoned cryptocurrency expert with a deep understanding of the market dynamics, I can shed light on the recent downturn in the cryptocurrency market and the intricacies of Bitcoin's limited supply and potential loss scenarios.
The cryptocurrency market's recent plummet, resulting in a staggering loss of over $100 billion in Bitcoin, underscores the volatility inherent in this digital asset space. Bitcoin, with its finite supply of 21 million coins, was designed to be fundamentally different from traditional fiat currencies. This uniqueness plays a pivotal role in the dynamics of its value and the potential for loss.
The concept of a limited supply is a cornerstone of Bitcoin's design, as highlighted by Trezor Blog. Unlike fiat currencies, such as the US dollar, where central banks can print more money, Bitcoin operates on a fixed supply. Once all 21 million coins have been mined, no new bitcoins can be issued. This scarcity is a key driver of Bitcoin's value but also introduces risks and challenges for investors.
Cane Island Digital Research, a reputable source in the cryptocurrency research space, reports an annual loss of 4% of Bitcoin for investors. This figure is significant and aligns with the idea that, despite the total supply being 21 million coins, only a portion circulates in the market. The New York Times further emphasizes this point, suggesting that out of the 18.5 million bitcoins mined, approximately 20% may be lost or inaccessible. This amounts to a staggering $140 billion in lost value, adding a layer of complexity to Bitcoin's economic landscape.
Understanding how Bitcoin is lost or destroyed is crucial. Mistakes in storing or sending Bitcoin are common, as highlighted by Trezor Blog. Storing bitcoins on exchanges introduces an additional layer of risk, as users rely on these platforms to safeguard their assets. While reputable exchanges exist, a history of cases over the last decade demonstrates instances where exchanges have either stolen users' assets or failed to prevent hacking incidents.
In conclusion, the recent market downturn serves as a reminder of the challenges and risks inherent in the cryptocurrency space, especially concerning Bitcoin's limited supply and the potential for irreversible loss. Investors must exercise caution in their storage and handling of Bitcoin to mitigate the risk of value destruction in this volatile market.
