While Bitcoin has boomed over the past decade and made many people millionaires, other owners of the world’s largest cryptocurrency have missed out. Why? One important reason: they no longer have access to their account. It’s estimated that more than $100 billion worth of Bitcoin has been lost, but some of that can be recouped, at least one company says.
A 2020 report from Chainalysis, a forensics company, estimated that approximately 3.7 million bitcoins were lost. That’s a total of approximately 19.6 million tokens in existence today, and a maximum supply of 21 million tokens when Bitcoin is fully mined. At the high end, that could be about 19 percent of the current supply, gone forever. Or is it?
Traders who have lost access to their Bitcoin or other digital currencies and assets may be able to get them back, at least with the help of one high-tech company.
Bitcoins may be recoverable
Bitcoin’s vaunted security works both ways and prevents the bad guys from getting their hands on your stock, but also – and often – you too!
One of the most touted aspects of Bitcoin and other cryptocurrencies is their security. Not only are they virtually impossible to forge, but transactions are virtually irrevocable. Once someone has your bitcoins, they own them forever. It’s a similar situation if you forget your password, it gets thrown away as part of a move or if you throw away a hard drive containing the coins.
But Chris and Charlie Brooks, father and son founders of CryptoAssetRecovery.com, have been recovering Bitcoin and other digital assets for people who have lost their passwords since 2017, despite high security.
“We estimate that about 2.5 percent of that 20 percent or so of lost coins can still be recovered,” says Chris Brooks. The figure equates to a whopping $4 billion in recoverable assets, while Bitcoin is worth almost $44,000, he says.
Of course, not all digital assets can be recovered. Damaged hard drives or hard drives that have been thrown away are likely gone for good. But Crypto Asset Recovery says it has a decent chance of getting your lost loot back if you had encrypted private keys but forgot your password or have a failed hard drive containing private keys.
But even if you have a wallet and they can pry it open, there may be no coins in it at all. Former Bitcoin owners who got into cryptocurrency years ago may have just hoped they’d left behind a long-lost treasure on that old hard drive, but weren’t sure and decided to take a look just to be sure.
“About half of the wallets we crack are empty,” say Chris and Charlie.
How to get your captured cryptocurrency out of a locked digital wallet
All kinds of digital assets can be stored on a hard drive somewhere: Bitcoin, Ethereum, Dogecoin or any number of popular cryptocurrencies. But also increasingly trapped are NFTs, or non-fungible tokens, which can be digital art, a collectible, music or something else. These are all potentially repairable.
The typical success story at Crypto Asset Recovery involves “an early Bitcoin adopter with a Blockchain crypto wallet,” says Charlie Brooks. These wallets are more than half of what they appear to be. An early enthusiast may have bought a few coins and then forgotten about them. But now that a single bitcoin is trading for a lot of money, even a few coins can be a nice return.
After being contacted, Crypto Asset Recovery consults with customers, asks their best guesses for passwords, and gets to work. Even if you only know part of your password or have a general idea of what it could be, the chances of accessing your lost crypto assets increase significantly.
From there, the team will attempt to “brute-force” your account and try all kinds of possible passwords based on your suggestions.
“We may end up doing tens of millions to hundreds of billions of password variations before we get it, or we may decide it’s not worth putting any more computing power into it,” says Chris Brooks.
Beware of scammers advertising wealth recovery services
Given the sensitive nature of the work, you may need to entrust an asset recovery company with potential passwords for your crypto account, which you may also use elsewhere.
The promise of access to your lost bitcoins can tempt even the most cynical owner to drop their guard against those who promise to help them get their money back. That’s easy to do if you have hundreds of thousands, even millions of dollars, locked up in a digital wallet somewhere.
But officials are warning consumers to carefully verify any company they hire for asset recovery. Many so-called companies are simply scammers who gain access to your account and then make off with the proceeds, if they have access to your account at all. They may charge an upfront fee to do the work, promising that you will eventually get your cryptocurrency and then walk away with that money.
According to the Commodity Futures Trading Commission (CFTC), the scam is highly sophisticated. Scammers may even issue press releases and false testimonials that appear to vouch for their wealth recovery services.
Officials point to several red flags that consumers should be aware of:
- You will be charged before any services are provided.
- The company’s physical address is not provided or it is located outside the US
- The company does not have a phone number and you are asked to communicate via chat apps.
- The company will ask for your bank account details so that the recovered money can be deposited there.
Those are some of the most important signals, although the CFTC offers this other warning signs and tips to stay safe.
3 common ways crypto traders lose access to their coins
Cryptocurrency has become extremely popular in recent years, and it is a trendy trading tool for many young people who are new to investing. A 2023 Bankrate survey found that nearly half of millennial Americans felt at least somewhat comfortable owning cryptocurrencies. But regardless of their age, crypto traders may not be familiar with the different ways these digital assets can be held, meaning they could lock themselves out of their account.
Cryptocurrency owners can lose access to their assets in several ways, and here are some of the biggest.
1. Don’t fully understand how custody works
Unlike traditional assets like stocks or bonds that are always held for you at a brokerage, cryptocurrencies can be held directly by owners using a cryptocurrency wallet, or a trading firm can hold them on your behalf. But this difference is crucial to getting your money back.
If a company holds the digital assets for you, you can work through their system to restore access to your assets. In this way it resembles a traditional investment firm. You can verify your identity and the company will reset your password so you can get back up and running.
But if you take over custody of your digital assets, you don’t have that luxury. Unfortunately, many of those new to cryptocurrency do not understand when they took over custody of their assets and the responsibilities that entails. To access your own assets, you need your seed phrase, a collection of 12 to 24 words generated by your crypto wallet.
Due to the potential dangers of holding assets on their own, Chris and Charlie Brooks highly recommend that those new to cryptocurrency sign up with a custodial wallet. A custodial wallet makes it relatively easy to contact your trading firm and access your cryptocurrency.
“Understand what it takes to manage a Bitcoin wallet before you dive in,” says Charlie.
2. Losing your sperm sense
People misunderstand the risks of crypto, says Charlie. “The much more likely risk for most people is losing their sperm sense – not having it stolen from a hacker, although of course that does happen.”
“The biggest misconception that gets people into trouble is not understanding that the opening sentence is a representation of your private key,” says Chris Brooks. “If you lose that, you have a problem.” Many people don’t realize that the seed sense is so important, he says.
The seed phrase unlocks both your wallet and all your crypto in the wallet. So it is vital that you maintain access to this seed sense. “It’s not like a bank account with a password that they can just reset,” says Chris.
Moving is a very common time when someone loses their basic senses, they say, but there is a simple solution.
“Buy a $30 safe from Amazon and keep your seed phrases in there,” says Charlie. “You need a place where you can keep them so that no one thinks, ‘Hey, I have to throw this away.’”
3. Self-sabotage
“One of the biggest hurdles we face is customers sabotaging themselves,” says Chris.
Self-sabotage happens when people try to solve the problems themselves and only succeed in making things worse.
“About 30 to 40 percent of the people we work with have problems with the hard drive on an old laptop,” says Chris. “For example, they reformatted it or gave it away.”
But the solution here is relatively simple: “Stop touching stuff – don’t format or reinstall a wallet,” says Chris. Resist the urge to try to fix something, because you’ll probably only make it worse.
In short
While it seems like a substantial portion of Bitcoin has been lost to the sands of time, your crypto stock doesn’t have to be a victim. So it may be worth seeing if you can get your lost belongings back. And it’s definitely always worth understanding what you need to do to manage your account correctly so you don’t get into trouble in the future.
