The situation in our environment will have a strange impact when we suddenly have great wealth because the investment we make in Bitcoin will never be known by the people in the circle where we live. Well, as you said, of course it is true that many Bitcoins will disappear from circulation because their owners die. I imagine that in the next 30 years Bitcoin circulation will certainly become thinner due to many reasons. Even though that is my assumption, for now it is true that if they don't pass on the private key to their family then there is no way for their family to own their BTC.
I partially disagree with you that most of the bitcoins that would be out of circulation would be as a result of the demise of some holders of bitcoin. There are thousands of people holding bitcoin, and no one is foolish enough to think that he would not have any preparation for securing his bitcoin for his heirs to inherit. At least not in this era, so many solutions have been brought to harness this situation of losing funds after the death of someone. Many bitcoin wallets have been dormant but were later considered to be lost. Yet after ten years, we would see a transaction taking place in that wallet. How come? Maybe someone found out the lost or hidden key phrase.
In the future one main thing that will reduce circulation is mass adoption and holding long encouragement. Imagine if 25% of the global circulation buys bitcoin; there will not be enough to circulate if this set of people and the previous investors hold their coins for 10 years or more. There will be a very high demand for bitcoin but no one will accept to selK. This will cause to the increase in value.
He is actually right, you just have to think about it again. Not many people have made plans about their BTC as per how to hand them over to their loved ones or how they will be used when they are gone. Discussions of doing this have been ongoing in many forums I belong to where BTC is discussed but I do no see any generally accepted way of doing this, just different suggestions and theories, leaving everyone to chose what is best for them. As expected, each of the suggestion have their merits and demerits
If I asked you now what is your plans about your BTC when you will be gone, I doubt you will be able to give me an explicit answer, therein lies the problem, the reason I support the statement you are trying to refute. Another simple example is the case of Satoshi who we are not sure if he is alive or not and if he is not, it is not clear if he gave his keys to anyone. There could be several of such cases that are not revealed but that does not mean that it does not happen, people will continue to die and just like treasures that people hunt, BTC might just be lost because of their owners not giving their keys to anyone before they die.