Quote from: timeofmind on May 29, 2013, 09:01:27 PM

Quote from: lucasjkr on May 29, 2013, 06:38:41 PM

If someone bought up 90% of the outstanding Bitcoins and destroyed their private key, the theory would be that the remaining BTC's would then be worth 10 times as much.

Supply is determined by the amount being actively traded. The market forces that dictate the price of bitcoin depend on the amount of supply and demand. If bitcoins are not being offered up for sale, then they play no part in determining the price. Whether the bitcoins were destroyed, or are just being saved for later, it makes no difference. But if someone bought up 90% of the bitcoins, the act of purchasing them would cause the price to go up incredibly high. After this large purchase, there would likely be a much higher demand than supply, which would maintain this high price; regardless of whether these 90% of bitcoins were destroyed or just saved away. The act of destroying them of course does not change supply, so it would not affect the price at all.

Supply absolutely has bearing on the overall value.

Take a publicly traded company - even if 75% of the shares are held by founders, those shares are still accounted for when figuring out the metrics of the company. Why? Those shares could be released to the market at any time.

Ex - Company A has 1,000 shares outstanding, 900 of which are owned by the founder who so far hasn't shown any desire to sell. The company earns $1,000 profit. Is the earnings per share $1 or $10? If you say that you can safely ignore the shares that aren't actively being traded, then you'd go for the later amount.

The total market cap of the Bitcoin economy might be $1.5 billion. Or, it could be $.75 billion, if half the coins have been lost. If people start setting the exchange rate as if half those coins have been lost and then they discover that those coins were not, in fact, lost, then the value of all existing Bitcoins at that point would fall by 50%. At least that will be the end result once rational actors have joined the market.