From what understand, money doesn’t just disappear. When you’re at a poker table playing, the sum of money everyone started with is the same at the end(when someone loses $100, other(s) gain $100). If I sell you a crypto for $100 and it drops to $0, I would still have your $100. In this case, wouldn’t someone/some groups of people get all the money that is currently being lost?
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So the idea of cryptocurrencies are that, unlike central bank backed fiat currencies, they are worth what people are prepared to accept their value is.
In a perfect world, cryptocurrency would not be traded for fiat currency, they would be exchanged directly for goods or services. This worked for the initial run of cryptocurrency, especially on the Dark Web that loves anonymity, cross border trade not regulated by government at any level, and separation from real market forces. There may have been a relationship between the value of a given cryptocurrency and a fiat currency, but it was incidental.
Then they got too big, and some people realised that there is always a market for people to buy stuff if it is in any way a limited resource, regardless of its actual value.
Currently, cryptocurrencies are no longer a way to buy goods or services (I.e. like an actual currency) as few people actually accept them. They are currently being traded like a commodity, like gold or diamonds, and like any commodity they are only worth what people are prepared to pay for them. This is why so few traders accept cryptocurrency for payment, why accept something that will vary wildly in value in a way you have no control over?
So as to the “lost” value, that assumes that 1) cryptocurrencies are in any way a stable commodity, and 2) that the value was there to begin with.
Given that 1 is demonstratively false and 2 is iffy at best, the story of “lost” value is just that, a story.
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