Key Management and Personal Loss
Self-custody puts the holder in charge of a secret that cannot be reset, so losing it or destroying the only backup is permanent.
How it happens
A private key, usually derived from a recovery phrase, is the entire authorization system, and there is no issuer, registrar, or support desk able to reissue it. Loss happens in mundane ways: a backup that was never tested, a passphrase added and then forgotten, a hardware device that fails with no written seed, a derivation path that the replacement wallet does not reproduce, a death with no inheritance provision. Irreversibility also applies to mistakes in the other direction, since sending to a mistyped address, to a contract that cannot forward tokens, or on the wrong network generally cannot be undone. Multisig and social recovery reduce single-point loss but add operational complexity that itself has to be maintained and documented over years.
What you can actually observe
On-chain dormancy metrics show how much supply has not moved in many years, part of which is generally understood to be permanently inaccessible. For an individual arrangement, the testable facts are whether a restore has actually been performed from the backup, whether backups are geographically separated, whether any passphrase is recorded separately, and whether an inheritance procedure exists in writing. Wallet software support for the specific token standard and chain is also checkable in advance.
Precedent
QuadrigaCX demonstrated the same failure mode at institutional scale in 2019, when the exchange stated that the only person holding its cold wallet keys had died.
What makes it more or less material
Relevant conditions include whether a restore has been tested, whether backups are separated and durable, whether multisig or social recovery is in place, whether an inheritance plan exists, and how often assets must be moved.