Almost 50% of bitcoins out of circulation

A recent analysis conducted by Chainalysis found out that almost 50% of the bitcoins in circulation have been lost. Chainalysis actively segmented the Bitcoin into different groups, based on their properties.

The segmented groups included:

Mined Coins – Bitcoins mined in 2017

Transactional – Bitcoins involved in active trading

Out of circulation (“Holders”) – Bitcoins held by long time miners, 7-9 years ago

Strategic Investors – Bitcoins bought in the last two years by seasoned investors

Original Coins – Bitcoins mined by Satoshi

Chainalysis only discussed the bitcoins that were truly lost and not the coins that were stolen through hacking or in some other way. The analysis found that Sitoshi’s bitcoins were completely lost for good and there was absolutely no chance for their recovery. Whereas, the second most lost segment is the hodlers group. By hodlers, Chainalysis refers to the bitcoins that were mined by the initial miners back in 2008 – 2010.  Almost 50% of the bitcoins that were held by hodlers have been perceived as lost. These coins could have been lost due to any number of reasons such as, people forgetting their account passwords, corrupted hard drives, or any other reason that may have resulted in people losing control of their wallets.

What makes Chainalysis’s report so convincing is their methodology of research. Chainalysis serves organizations such as the IRS and Europol. It has access to a wide range of data and has experience when it comes to studying Bitcoin wallets. Although the full methodology of the analysis has not been revealed, a spokesperson of Chainalysis did revealed that in order to analyze the hodler category of their report, transactions carried out after a fork were observed.

A fork basically breaks the blockchain into two and as even the inactive investors have to carry out a transaction to convert their coins into a new chain therefore, it provided a great opportunity to study the number of active Bitcoin owners.

The spokesperson further clarified that to determine the amount of coins lost during transactions, they scoured the internet for reports on coin loss. The main reasons that were found in this segment included carelessness, loss of private keys, and misdirected transactions that transferred coins into non-existent wallets.

Chainanalysis did not provide clarification regarding Sitoshi’s coins but stated that there are around 1 million coins associated with Sitoshi’s wallet. These coins were mined when it was significantly easier to mine coins and a person could mine 50 coins by just using their laptop.

The report released by chainalysis provides a deeper insight into the crypto realm and will enable the potential investors to understand how bitcoins are usually lost and what steps should be taken to avoid it.