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The early Bitcoin adopters (2009-2012) deserve praise for the profit they amassed. Newcomers will often describe them as lucky for stumbling upon Bitcoin at a time its price was a mere dollar or even less. Luck is out of the question, though.
The early adopters of Bitcoin were also mining BTC, at least until 2011 when mining transformed to industrial scale with the ASICs hardware integration.
Bitcoin kept increasing in numbers, but it was only in 2013 that it achieved extreme growth in user base.
Some of them accumulated so many Bitcoins that reached “whale” status. In USD terms, the valuation of the whales’ BTC wealth is reaching today multiple millions or perhaps even billions of dollars.
Although, more whales appeared recently. Microstrategy, Tesla, trading services like Bakkt, PayPal, Grayscale. BTC has reached a whole new level of investing and is now considered a priority even by institutional investors.
BTC has changed hands into some of those that control most of the wealth in the world.
And in this year, with the appreciation of Bitcoin at the current price level of $50,000, the early whales are facing fear, especially after the questionable deaths of John McAfee and Mircea Popescu (read), or the most recent revelation of the 2017 US government officials assassination plot against Julian Assange.
Some tech-savvy individuals and developers, wandering around the dark corners of the internet, looking at anything new and innovative. Downloading dozens of apps and testing them daily, writing code, researching tech forums and many of them had an undeniable interest in cryptography.
Moreover, some Silicon Valley investors read about Bitcoin between 2010-2012 and got in at the right time.
At some early stage, those first Bitcoin enthusiasts applied logic and math and discovered that possibly, the price of this asset would appreciate rapidly if demand kept increasing at such high rates. Some high-profile individuals (i.e. Hal Finney) made a case for a one million dollars price for a single Bitcoin, even back in the beginning, when the price was just trading in cents.
Early adopters found out very early that there was too much potential by just accumulating BTC (sometimes, by any means possible) since its price would appreciate vastly in the following years.
And, as demand for Bitcoin kept rising, price kept appreciating. Although there was also a second factor that was mostly not considered until 2012 when the first halving applied.
The supply of BTC is already close to 19 million. It is only 2.2 million BTC left to be mined, about 10% of the fixed limit. Since it will only be 21 million Bitcoin, we can take this number as fixed in our graph. However, researchers have calculated that about four million Bitcoins have already been lost and are irretrievable. (Source)
Bitcoin, besides everything else, is designed with scarcity. There is a limited fresh supply of new BTC that today is 6,25BTC/10 minutes or 900 new BTC enter the circulation daily. Back in 2013, this number was 3600.
The halving is reducing the mining rewards by half. Miners are running a business and have to pay an enormous cost that varies according to electricity consumption and price.
Within the years, the early adopters discovered lost Bitcoins were also an important variable that was not considered and not priced in until later.
In both cases, the total supply is going to be lower.
Satoshi had explained this, but probably just a few had in mind the financial laws that apply in this.
With demand stable, a reduction in the supply curve (in the case of BTC, vertical line considering the total 21m BTC) is bound to increase the price.
Part of the BTC community seems it can't hide its excitement even when deaths of whales occur!
This is also the case with the unexpected death of Mircea Popescu, a controversial character that Bitcoiners today rushed to claim an "OG". Although, what they cared most about was the number of his BTC stash.
Source: Twitter (The original Tweet was deleted a few minutes later)
One thing we can assume after reading this tweet is that Pompliano doesn’t own any Bitcoin, meaning, he doesn’t own a private key that provides him access to any important wealth. He obviously didn’t think this through before publishing and was advised to delete the tweet.
For far too many, BTC is just a number in an exchange today.
Think of it as a donation to everyone.
-Satoshi, when asked about the irretrievable coins
The statement by Satoshi stands correct.
In free markets without (too much) government intervention, the invisible hand of the market decides the price of assets. The top free market today is the cryptocurrency market. No government can set the price of BTC and cap it. No exchange can do that either.
Although there is manipulation, this can only affect the short-term price action. The real action is in the long run and it is driven by demand. But supply is equally important. Charts are explaining how a decrease in supply on most occasions will lead to a rise in price. It is the same for BTC. With demand being stable, the decrease in supply will increase its price.
So, a reduction of supply by adding more BTC to the pile of “lost BTC” would increase the price.
And maybe this could be the reason for whales (new and early ones) to be happy when Bitcoins become lost, together or not with their owner.
While John McAfee never admitted he was holding any Bitcoin, many widely suspected he was holding a lot.
Popescu was an early Bitcoin adopter and some suggest that he could have been in control of one million coins, although probably the amount was way less (source) but not insignificant either.
Julian Assange announced in 2017 how the Bitcoin donated to Wikileaks appreciated by 50,000 times since 2010 (Source), although there is almost no public information on the current holdings of Wikileaks or Assange.
There is no certainty if there was a connection to the deaths of McAfee and Popescu with their Bitcoin holdings. For McAfee, we have limited information if he was lately holding any cryptocurrency. Same with Assange.
Of course, everyone was taking steps to increase privacy and hide the Bitcoin wealth from plain sight. The blockchain is a public ledger and with the recent developments of blockchain analytics, researchers can connect the dots and in most cases can even bypass obfuscating mechanisms (mixers) and trace the route of Bitcoin to a certain identity.
There are addresses connected to names, those addresses published for donations and payments. And with the use of advanced analytics that some companies like Chainalysis possess, it could be reasonable to assume that a researcher could uncover an approximate number of BTC held. Although probably just a few know about these numbers.
The private keys are a tremendous responsibility. There is no recovery procedure, although, on rare occasions, passwords have been recovered.
There are mechanisms to secure the crypto wealth and pass it on to others after an event like the decease of the owner occurs. Multi-sig wallets, for example, are a secure approach. It would take 2/3 or 3/4 individuals and any combination set that will apply for accessing the coins. Although, this one could also be a problematic approach. Risk is divided this way but not contained.
Whales are taking all the necessary extra steps to secure their wealth from being stolen. They will split the private keys and perhaps even lock them in bank vaults in the four corners of the world.
Although, maybe, the target today is not the keys, but the whales themselves.
Motivated by the appreciation of the remaining Bitcoins, maybe some whales will think about removing some more BTC from the total supply, by eliminating other whales. Or maybe this is already happening.
The “lost” Bitcoins will increase with this approach, and the price of BTC will appreciate. With the elimination of the holder of the keys and no successor to the keys available.
We may find similarities today in the Kleiman case.
Kleiman died in his home in April 2013 seemingly of natural causes related to complications from a MRSA infection.
The Kleiman case also requires a lot of discussion, (with the involvement of Craig Wright and many more) so I will not be able to import it in more details in this article, but perhaps will follow with at a later point.
In short, according to Craig Wright, Kleiman was working with him for the creation of Bitcoin and Craig Wright was Satoshi. Satoshi according to a research has mined more than a million Bitcoins, which were never moved (except the first transaction send to Hal Finney).
There is some speculation about the recent death of Bitcoin maximalist Mircea Popescu, although the official announcement was . Some publications even went with the possibility of suicide. He was certainly a controversial figure and accumulated vast wealth in Bitcoins.
Pompliano only stated the obvious from the perspective of an outside speculator and observer. This is the first thought everyone had in mind, and we already know about how whales behave, while in Popescu’s case, there is a possibility the access to these coins (private keys) is now lost. And this indeed adds value to the rest.
Maybe there will be (or have been) attempts to eliminate the top-whales and anyone holding too many should reconsider their approach.
The death of a BTC holder and the lost BTC in his possession added value to the rest of BTC. The same can be said for all cryptocurrencies having a fixed supply and stable demand. The price of BTC recovered quickly after this event and there is also the case of McAfee. There is a possibility he was also holding a vast fortune in BTC and other cryptocurrencies, and although he had never announced it, there are still people out there looking.
Most BTC whales already have set mechanisms to pass their fortune to relatives in case they pass away. Not so sure though that everyone is on the same page, or that everyone has people to trust with their vast wealth. It comes to trusting others and there could be only a few selected individuals for each one to trust with their wealth.
Just the thought that maybe the hundred of thousands of coins held in cold storage by these whales will become orphaned, with no one having access to the private keys, creates an incentive to increase the value of the rest coins.