Question:
I have read few posts of persons talking about losing their wallet's containing BTC and couldn't recover it at all. Hence, as people keep losing their BTC due to loss of wallet seed phrase, can it affect or cause a decline in BTC supply entirely?
It would definitely cause a decline or a reduction in the number of bitcoins in circulation. It doesn't reduce the number of bitcoin generally, just the amount in circulation.
Fortunately, this also wouldn't negatively affect the prices of the bitcoin in circulation. As the demand increases and combined with a limited supply, the price of bitcoin is bound to go only one direction. All the way up.