Bitcoin's "Deceased" Founder: A Potential Driver of Cryptocurrency PricesFor a long time, the United States' expanding trade deficit, its $35 trillion debt pile, and the continued decline in the purchasing power of the dollar have been considered key drivers of Bitcoin's price surge. Even the possibility of Republican candidate Trump winning the election in November has been cited as a bullish catalyst for the cryptocurrency recently
Bitcoin's "Deceased" Founder: A Potential Driver of Cryptocurrency Prices
For a long time, the United States' expanding trade deficit, its $35 trillion debt pile, and the continued decline in the purchasing power of the dollar have been considered key drivers of Bitcoin's price surge. Even the possibility of Republican candidate Trump winning the election in November has been cited as a bullish catalyst for the cryptocurrency recently. Currently, the world's largest cryptocurrency is just a few percentage points away from its all-time high.
However, one structural bull case hasn't received much attention, and it could have a significant impact on Bitcoin's long-term price: lost coins due to the demise of holders or simply poor planning. This argument has recently gained traction as a documentary released by HBO this month could potentially reveal the true identity of Bitcoin's creator, Satoshi Nakamoto.
Prior to the documentary's premiere, some speculated that Satoshi Nakamoto was Len Sassaman, an American computer programmer who died in 2011. The death of Satoshi Nakamoto could potentially alleviate the immense fear that has hung over the Bitcoin market for years - that he could sell his estimated 1 million Bitcoin holdings. This constitutes a significant portion of the existing 21 million Bitcoins. There has long been concern that such a large-scale sale could negatively impact Bitcoin's price.
If Satoshi Nakamoto died without proper instructions to transfer his assets, the fixed supply of Bitcoin could be closer to 20 million. Sean Farrell, head of digital asset strategy at Fundstrat, highlighted this dynamic in a report earlier this month. "If they confirm that Satoshi Nakamoto is deceased, there is a slight upside to Bitcoin as it essentially means that portion of the supply is permanently 'burned'," Farrell said. "The true circulating supply of Bitcoin is undoubtedly below 21 million," Farrell told Business Insider. "We know this is true, but it's almost impossible to verify."
This is also because even if the holder is alive, losing Bitcoin is relatively easy. Lost Bitcoin is essentially "burned," reducing the amount available for investors to purchase and reinforcing a fundamental economic principle: when demand is constant or increasing, a decrease in supply means a higher price.
Farrell estimates about 1.5 million Bitcoins (around 7.5% of the total supply) could be considered "potentially lost" because they haven't moved since the first Bitcoin exchange was founded in 2010, about a year after Bitcoin's creation. A 2021 New Yorker article featured a story about a man in Wales who accidentally threw a hard drive containing Bitcoins into the trash, losing a stash that was worth roughly $500 million at the time. "It may not be until some time has passed that we get a full understanding of how much Bitcoin supply has been lost," Farrell said.
Sophisticated investors who own large quantities of Bitcoin typically store their cryptocurrency in encrypted cold wallets to protect against hacking. This means the Bitcoin isn't stored on exchanges like Coinbase, which offers recovery processes for family members of deceased clients. Instead, these investors often store their cryptocurrency on physical USB drives, an act that might seem nonsensical to some and could easily be lost or overlooked in the chaos of settling an estate.
Bitcoin's decentralized nature means that without the private key to a wallet or hard drive, no bank or institution can access or recover the assets. "Unlike traditional financial accounts, there's no institution you can contact to recover your cryptocurrency. If no one knows your private key, your assets are locked forever," said Eric Lemieux, CEO of Wealthica. He added, "If you keep Bitcoin in a cold wallet, but one day you pass away, and no one has your private key to withdraw the Bitcoin, those Bitcoins could be lost forever."
Lemieux said it's essential for Bitcoin investors who keep their assets in cold wallets to ensure their estate planning "includes your private keys or the phrase that can recover your assets through a lawyer or secure storage." Otherwise, more lost Bitcoin could mean a higher price.
In conclusion, the death of Satoshi Nakamoto and the possibility of accidentally lost Bitcoins from holders could lead to a reduced supply of Bitcoin, which in turn could drive prices up. As more investors flock to the Bitcoin market, this potential "lost" supply could become a critical catalyst for further price increases.
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