Economy

Bitcoin is getting scarcer because bad exchanges are taking 1.2 million bitcoins out of circulation

November 19, 2022
Izer

One of the biggest factors differentiating Bitcoin (BTC) of fiat currencies and most cryptocurrencies is Hard limit of 21 million on total circulating supply. However, the demise of many cryptocurrency exchanges over the past decade has permanently eliminated at least 5.7% (1.2 million BTC) of all issuable Bitcoin from circulation.

The lack of clarity around proof of reserves on a cryptocurrency exchange has emerged as the main reason for its sudden crashes, as we saw recently with FTX. Historical data on cryptocurrency crashes revealed that 14 cryptocurrency exchanges, taken together, were responsible for the loss of 1,195,000 BTC, which is 6.3% of the 19.2 Bitcoin currently in circulation.

Bitcoin lost due to cryptocurrency exchanges. Source: Casa blog

An investigation by Jameson Lopp, co-founder and CTO of Bitcoin storage platform CasaHODL, revealed that Mt. Gox retains the number one spot when it comes to losing BTC holdings on exchanges.

While Bitcoin’s scarcity is directly related to its value as an asset, Lopp noted that fake Bitcoin offerings are currently threatening the ecosystem, adding that “Bitcoin wouldn’t be a great store of value if most people were buying fake Bitcoin.” Investigations confirm that at least 80 crypto assets have “Bitcoin” in their names, which is only intended to mislead BTC investors.

As a result, the purchase of fake Bitcoin assets by investors negatively affects the rise in the price of the original Bitcoin.

To ensure Bitcoin’s status as sound money, self-guarding is emerging as the most effective way to reduce reliance on cryptocurrency exchanges and corporate “fiat bitcoin” contracts.

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Related: Adam Back, CEO of Blockstream, talks Bitcoin about a game of Jenga

Salvadoran President Neb Buckle announced acquisition plans 1 BTC every day starting November 17, 2022.

Public records show that El Salvador currently holds 2,381 BTC with an average buy price of $43,357. However, Bitcoin’s sluggish performance opened up an opportunity for the country to drastically lower the average Bitcoin holding price.