Research: 36% of Bitcoin Lost or Unmined, US Govt Blockchain Monitoring Spend Hits $5.7 Million

Research: 36% of Bitcoin Lost or Unmined, US Govt Blockchain Monitoring Spend Hits $5.7 Million

CryptoGlobe Staff Writer
  • Chainalysis report reveals that 36% of BTC in circulation is lost, likely lost or unmined
  • Diar report shows that IRS and other US Government agencies are responsible for more than a quarter of on-chain transaction monitoring spend

New research reports from Chainalysis and Diar have revealed some interesting insights into the state of bitcoin and the increasing importance of cryptocurrency to tax regulatory agencies in the United States. Chief of these are percentage breakdowns showing the likely state of that bitcoin and the amount of money being spent by US tax authorities on analysis services monitoring blockchain transactions.

Chainalysis Report Reveals Bitcoin is Scarce

In July, CryptoGlobe reported that a Chainalysis study put the percentage of missing or irretrievable bitcoin at 20 percent of the 21 million total issued bitcoin. The company’s latest report digs into this further, revealing that 36 percent of all BTC in circulation is lost, likely lost or unmined.

In addition, the amount of bitcoin held by speculators is 22 percent of the total (roughly 4,620,000 BTC), while investors hold about 30 percent or 6,300,000 BTC. The data is represented below:

Chainalysis Bitcoin Holding BreakdownSource: Chainalysis

Recent Chainalysis data studying the Bitcoin money supply over the course of a year showed that long-term bitcoin investors sold approximately $24 billion worth of their holdings to new market entrants between December 2017 and April 2018, which placed tremendous downward pressure of the bitcoin price and contributed to the significant downward movement over that period.

Data based on an extension of the study period through August 2018 shows that both investors and speculators largely held their position over the summer, with the approximate percentage holdings remaining practically unchanged.

Bitcoin held for speculative purposes stays at 22 percent, while bitcoin held for investment also remained at about 30 percent over the summer of 2018.

Diar Research Reveals US Government Interest in Blockchain Transactions

Diar’s report shows a substantial uptick in government interest in on-chain transactions, especially for the purpose of tax enforcement.

According to the research, the amount of money spent by government agencies on paying for the services of blockchain monitoring and analysis firms like Chainalysis has tripled.

US Government spending on Blockchain AnalysisSource: Diar

Aside from the obvious tax enforcement implications of government monitoring, the analytics and data presented by such firms gives regulatory agencies valuable information that can be used to enforce KYC and AML laws. Since every transaction is recorded immutably and publicly on many blockchains, law enforcements agencies can use the services of these companies to find out a substantial amount of information about who is moving what and where.

The data shows that of $5.7 million spent on blockchain analysis firms, Chainalysis alone takes up $5.3 million, with the IRS being its biggest government contract worth roughly $1.6 million.