One of the most significant factors that differentiate Bitcoin from other fiat currencies, as well as other cryptocurrencies, would be the hard limit of 21 million on the total supply that is under circulation.
However, the demise of several crypto exchanges over the last 10 years has already taken out close to 5.7% of the total issuable Bitcoin from circulation. This lack of clarity around the proof of reserves of a crypto exchange did come out as the main reason for the sudden collapse- which was highlighted by FTX. Historical data around these crypto crashes also went on to reveal 14 crypto exchanges that were seemingly responsible for the loss of around 1,195,000 BTC, which is representative of 6.3% of the BTC currently in circulation.
Bitcoin Holdings Have Been Taking Hits From Fake Exchanges
An investigation that was conducted by Jameson Lopp, the chief technology officer and co-founder of Bitcoin storage platform CasaHODL, went on to highlight that Mt. Gox maintained the top position when it came to crypto exchanges that had been losing out on BTC holdings. Although the BTC scarcity is directly related to the value of this asset, Lopp also pointed out that the fake offerings of BTC did threaten the ecosystem currently- as he added that BTC will not be a great store of value if most individuals were buying fake cryptocurrencies.
Investigations have also confirmed that around 80 different crypto assets had BTC in their names- which was done to mislead the investors of BTC. As a result of this, investors that have purchased fake assets of the cryptocurrency have been negatively impacting the price appreciation of the original BTC.
To ensure the position of Bitcoin as sound money, self-custody will be coming out as the most effective way of reducing reliance on corporate paper BTC contracts, as well as crypto exchanges.