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?
The supply stands still because they are still there, and maybe one day someone will figure out a way to hack into all these dead and lost coins in the distant future when tech is higher, because that should be done but at the moment it does impact the price.
Well, since they can't be touched, they can't be sold neither, and since they can't be sold there are still buyers and coins are still bought and yet those coins are forever gone and can't be sold. That's why the price goes up a bit, or at least it benefits the price going up in the future whenever something like this happens. Plenty of people are worried that something else would happen but the reality is that the price is the only thing that changes.