In March 2022, Netflix released a documentary about Gerry Cotton, founder of Canadian crypto exchange QuadrigaCX. Cotton died while on honeymoon in India, and he died holding the private keys for Quadiga’s Bitcoin (BTC) wallets.
Cotton’s death and the disappearance of the exchange’s Bitcoin triggered a host of theories and crowd-sourced research, eventually leading to the conclusion that Cotton had been stealing funds for years.
While Cotton’s story is extraordinary, most stories of lost crypto aren’t. In this article, we explore how much BTC is lost day-to-day, and provide an estimate of the amount of Bitcoin wallet holders are likely to lose in 2022.
How Does Bitcoin Get Lost?
Analysts have estimated that at least 20% of all BTC is lost although another story suggests about 2.5% of those funds can still be recovered.
Crypto gets lost for a host of reasons:
- People forgot the passwords to their wallets
- People make a mistake in recording their seed phrases
- People die without giving adequate instructions on how to access their funds
- People unintentionally (or occasionally intentionally) send crypto to a burn address, or to an address on a different network.
Crypto Asset Recovery works with these people every day to try to regain control of their funds.
However, this does not include coins 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. As such, they are excluded from this research note.
How Much New BTC is Issued Each Year?
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.
How Much Bitcoin is Lost Every Year?
The simple answer is that no one knows for sure. It’s clear that the vast majority of the approximately 3.8 million lost Bitcoin was lost early in the blockchain’s history before it had any economic value.
During its busiest times, more than 1,000 people a week contact CryptoAssetRecovery.com looking for help recovering funds.
Chainalysis, whose 2017 estimate that 20% of BTC is the most widely quoted, estimates that 2% of Bitcoin transacted in a given year is lost. They hold that the 2% estimate “is based on scraping the Internet for reports of lost coins… [and that the estimate] is not based on statistical extrapolation.”
The other occasionally cited estimate comes from a 2020 Cane Island Digital research note, which estimates that “about 4% of the available supply of Bitcoin has been lost each year.”
Neither study provides a methodology for reproducing this estimate. As such, a range of estimates would be ideal.
Given that between 2% – 4% of the 328,500 BTC mined in 2022 is likely to get lost, somewhere between 6,570 – 13,140 Bitcoin is likely to get lost.
As of April 20, 2022, 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.
