Roughly 20% of all Bitcoin—millions of coins—are permanently lost because owners can no longer access their private keys.

According to blockchain analysis firm Chainalysis, between 2.78 million and 3.79 million Bitcoins were estimated to be lost as of 2020—roughly 17% to 23% of the total circulating supply. Coins are classified as 'lost' when they haven't moved from their addresses for more than five years.The most famous case is James Howells, an IT worker from Newport, Wales, who accidentally discarded a hard drive containing 8,000 Bitcoins in 2013. Despite years of legal efforts and landfill search requests, the drive remains buried and unrecovered. Another significant portion belongs to Bitcoin's anonymous creator, Satoshi Nakamoto, whose estimated 1.1 million Bitcoins have remained untouched since the network launched in 2009.Bitcoin's security relies on ECDSA (Elliptic Curve Digital Signature Algorithm), a cryptographic method that ensures only the private key holder can authorize transactions. Unlike traditional banks, there is no central authority or recovery mechanism if you lose your 256-bit private key. This absolute finality is fundamental to decentralized finance but creates a permanent loss of assets when human error occurs.Lost Bitcoin amplifies scarcity in the market. Since Bitcoin's supply is capped at 21 million coins, the loss of nearly 4 million coins significantly reduces the actual liquid supply available for trading and investment. Institutional investors often account for this reduced supply when building long-term valuation models.