There will be a fixed number if Bitcoins, and people, because of human error, will accidentally lose Bitcoins every now and then.
This must mean that Bitcoin will eventually seize to exist? Or at least shrink to minimal amounts, when it shrinks to a certain level, it will no longer be useful.
Is this correct?
It is a bit impossible to happen. But let's say that it happened. The price of bitcoin will pump so much, like how other alts that conducts token burning. The supply is minimized while the demand grows, this increases the price in a faster rate. Bitcoin wont lose its value, and once the future comes that the mass adoption of digital assets happens and Bitcoin is still on the top, it will have a much higher price.