Heard on the radio about a guy who had 7,000 bitcoins on an encrypted flash drive and forgot the password. He had used 8 attempts and if he failed two more times, the flash drive would self-delete. Sucks to be him.
So my question is what happens if his bitcoins are lost? I assume they just disappear. If they disappear, since they are on a flash drive, the market wouldn't know right? It would be as if they are still in storage.
So, a significant (I assume it's significant) amount of bitcoins disappear and the market has no way to adjust to the new supply/demand reality. Does this cause a significant market distortion? Over time, as this happens to more people, is there any discovery mechanism to signal that the remaining bitcoins should be worth more?