The story of Welshman James Howells has long become a legend in the crypto world: the man accidentally threw away a hard drive containing 7,500 BTC, and when Bitcoin rose in price years later, he tried to convince the city council to allow digging up the landfill. The council, of course, refused — authorities do not often accommodate citizens’ wishes to overturn an entire city dump.

But behind the comedic story lies a harsh truth: Bitcoin has no “forgot password” button, and if a key is lost, the coins disappear for the owner forever. And Howells is far from the only hero of such dramas from the early crypto era. According to various estimates, roughly one in five bitcoins is in the status “alive but inaccessible.” The balance exists, movement is impossible. These coins continue to exist on the blockchain, but are permanently removed from circulation, creating a natural scarcity, which becomes a key feature of BTC as an asset.

The concept of “lost bitcoin” does not mean the coin disappears from the blockchain. It is still visible on the network — no one can sign a transaction anymore. This happened most often in the early years of crypto, when bitcoins were stored on old laptops, flash drives, random disks that were thrown away with old equipment. People did not yet perceive BTC as something valuable, so no one thought about backups. Analytical companies note that the lion’s share of such losses occurred during 2009–2013.

No less drama unfolded around seed phrases and passwords. The most famous story is programmer Stefan Thomas, who forgot the password to a disk with 7,002 BTC and now lives next to a device that could make him a billionaire, but does not. There are thousands of similar cases, they just are not written about in the news: inactive addresses are clearly visible in the blockchain for years and gradually classified as lost.

Another major category of losses is the death of an owner without keys passed to heirs. Bank accounts can be restored with documents, but Bitcoin cannot. If a private key was unknown to anyone, the coins remain on the network forever, as if preserved. There are especially many such cases among early users who did not yet anticipate that their digital coins would outlive them.

Tragedies also occur of another kind: coins are sent to addresses valid in form but effectively “dead.” The network honestly executes the transaction, but if no private key exists for the address, BTC turns into the digital equivalent of gold cast in concrete. This is how the famous burn addresses appear. Sometimes users sent funds to addresses of other networks, where access is also impossible. There is a special category — ancient coins mined by early miners and never used. They remain untouched for decades and are most likely also lost.

All these disparate stories create a general effect: 15% to 20% of all bitcoins, according to analysts, will never enter circulation again. And this has profound consequences for the market.

Formally, the maximum BTC supply is 21 million, but the real available volume is much lower. According to fresh 2025 data, about 3.3–4% of coins are lost annually — more than is mined after the last halving. Thus, the shortage in the system grows naturally, and each lost wallet reinforces Bitcoin’s deflationary model.

This reduces potential selling pressure: coins lying on “dead” addresses will never enter exchange order books even during panic. As a result, the remaining “live” coins concentrate among long-term holders and large players. The market becomes more sensitive to every major movement in the network: a single tranche can have a much stronger impact than if all 21 million BTC were available. That is why institutional purchases increasingly trigger chains of sharp market movements — liquidity has become denser and more reactive.

Paradoxically, lost bitcoins also strengthen the “digital gold” narrative. Just as gold becomes more valuable when deposits are inaccessible, Bitcoin rises when part of the supply disappears from circulation due to human errors. This reinforces the holding philosophy: the longer people hold coins, the more valuable the remaining available supply becomes.

A natural question arises: can lost bitcoin be recovered? Almost always, the answer is “no.” The blockchain does not care about the fate of the owner — it only checks keys. If the keys no longer exist, the story is over. Rare successful recovery attempts are based on the fact that the data was not entirely destroyed: a forgotten backup, a preserved disk sector, a seed phrase written down once. But these are exceptions. If the keys were physically destroyed or the password to an encrypted storage is lost forever, the chance is zero.

Therefore, the only reasonable strategy is not recovery attempts but prevention. Seed phrases should be stored in multiple locations, separately and on physical media, not in clouds or smartphone galleries. Cold wallets, hardware devices, and multisig schemes reduce the risk of human error and compromise. It is important not only to store access correctly but also to plan its transfer to relatives so that coins do not vanish with the owner, as happened to many early enthusiasts.

In the end, Bitcoin resembles a strict old-school teacher: it forgives no mistakes, grants no leniency, and the lesson is learned for life. Coin losses have become part of its economy, an element that reduces available supply and makes remaining BTC even more valuable. And the more the market realizes that every mistake creates a new digital “keyless chest,” the more cautious investors become. In a world without intermediaries, the price not only rises — it is paid for carelessness.