The strict 21 million total circulating supply cap of Bitcoin is one of the main characteristics that set it apart from fiat currency and the majority of cryptocurrencies. But over the past ten years, a number of crypto exchanges have shut down, effectively removing at least 5.7% (1.2 million BTC) of the entire Bitcoin supply from circulation.
As was recently the case with FTX, the lack of clarity surrounding a crypto exchange’s proof-of-reserves emerged as the main cause of their abrupt collapses. According to historical information about cryptocurrency collapses, a total loss of 1,195,000 BTC—or 6.3% of the 19.2 Bitcoin now in circulation—was caused by 14 crypto exchanges.
Self-custody emerges as the most efficient solution to lessen dependency on crypto exchanges and corporate “paper Bitcoin” contracts to maintain Bitcoin’s standing as a store of value.
The scarcity of Bitcoin and its value as an asset are strongly correlated, according to Jameson Lopp, co-founder of the Bitcoin storage platform CasaHODL, adding that fraudulent Bitcoin offerings now undermine the ecosystem.
If the majority of people are purchasing fraudulent bitcoin, he continued, “Bitcoin will not be a wonderful store of value.” Research has revealed that at least 80 digital assets, whose sole purpose is to deceive BTC investors, include “Bitcoin” in their names. He implied that investors buying fake Bitcoin assets have a negative effect on the price of real Bitcoin.
Nayib Bukele, the president of El Salvador, recently declared plans to buy the dip and begin purchasing 1 BTC each day on November 17, 2022. Top international organisations and experts have criticised the government for adopting Bitcoin as legal tender because of its likely impact on the economy of the nation. Reports indicate that the public hasn’t reacted as expected to the legal tender status, and the purportedly low adoption rates haven’t had the impact these organizations and experts had anticipated.
He also asserts that a negligible portion of the nation’s GDP has been allocated to Bitcoin. According to available information, El Salvador presently owns 2,381 BTC, with an average purchase price of $43,357.
Because of its poor performance, the nation has also been able to significantly reduce the average price of its Bitcoin portfolio since it began acquiring in November 2021, when it was at its peak.