Coin Metrics analytics platform has launched a new tool that displays a realistic view of the amount of Bitcoin in circulation. Recall that more than 18.62 million bitcoins have been mined so far.
However, as Coin Metrics points out, many coins have been lost, so they are no longer available in the market. The new tool allows for a better understanding of the world’s crypto scarcity and a better understanding of the scale of the blockchain asset industry.
Let’s start with an explanation. Millions of bitcoins can indeed be lost, and the reason for this is human inattention. Nevertheless, in the early years, the cryptocurrency was very cheap: its rate at one time did not exceed the dollar. In addition, Bitcoin could be mined even with a conventional processor, and due to the lack of serious competition on the network, this activity brought a lot of coins — 50 BTC per block at that time.
As a result, interest in the cryptocurrency project was primarily explained by the novelty of the latter, and not by the desire to earn money. That is why the owners of BTC lost access to their addresses, accidentally threw away hard drives with the necessary files and did other similar things.
As we learned in January this year, the former owner of 7,500 BTC even offers to shovel the local dump to try to find his digital medium. He accidentally threw it away in 2013, and since then the amount in coins has risen significantly. Read more about the story in a separate article.
How many bitcoins are there in total?
A metric called «free float supply» — or in the original «free float supply» — signals that the actual number of circulating bitcoins is barely reaching the 14.5 million mark. This means that approximately 3.9 million BTC are permanently out of circulation. The researchers did not elaborate on what the methodology for calculating the indicator is based on, but a quick glance at the graph shows that they have excluded coins that have not moved in the past five years.
In our opinion, this does not necessarily mean that these coins have been lost. Firstly, some cryptocurrency owners rely on long-term investments, so they may well keep bitcoins for five years or longer. Secondly, we have more than once met with examples of the «revival» of the cryptocurrency, which was previously considered lost. For example, in May 2020, an anonymous user moved 50 BTC mined back in 2009 — shortly after the launch of the cryptocurrency project. Accordingly, they have been inactive for over eleven years.
Recall that the circulating supply is the current volume of cryptocurrency that has been mined and is technically available for use. Circulating Supply is also a key metric used in calculating the market capitalization of a coin. Market capitalization is equal to the product of the circulating supply price. That is, if the network has a million coins worth $ 10 each, the market capitalization of this project is $ 10 million.
According to platform analysts, the market capitalization of both Bitcoin and its forks — that is, branches created on the basis of the first cryptocurrency — may be overestimated. This means that investors should not use capitalization as the only benchmark for making transactions on the crypto market. If Coin Metrics’ estimate is correct, it could mean that Bitcoin’s real market capitalization is $ 572 billion instead of the stated $ 733 billion.
Be that as it may, even in this case, the cryptocurrency will still remain the largest on the market. It’s just that her dominance rate will be lower. Today it is 60.4 percent, that is, 60 percent of the capitalization of the entire cryptocurrency market falls on Bitcoin.
Meanwhile, the trend for the outflow of BTC from centralized platforms continues in the cryptocurrency industry. The day before, 14,875 BTC worth more than $ 599 million were withdrawn from the Coinbase Pro exchange at the moment. The last largest outflow from Coinbase Pro occurred on January 31, when 15,200 bitcoins, worth about $ 600 million, left the exchange, Decrypt reports.
This trend is a clear sign that large investors and organizations continue to buy up the main cryptocurrency. They withdraw it from exchanges to cold wallets for long-term storage, that is, most of them rely on a long-term rise in the price of Bitcoin.
Takeaway: The mainstream cryptocurrency may be much more scarce than meets the eye. And this is only a plus — the owners of bitcoins have an asset in their hands, which has additional potential for further growth.
We believe that this argument really counts in favor of cryptocurrency. Its maximum amount is limited and known in advance — along with the rate of production of new coins. The same cannot be said about gold, silver or other precious metals. So there are more reasons for communication with BTC and other coins.