How does "people losing their key" make bitcoin more valuable?

Lately been having a hard time wrapping my head around this.

If you lose your keys, those coins are gone forever and are no longer in circulation forever since no one can access it.

But how does this make all other coins more valuable? Doesn't the "value" locked in those coins just "lost value"?

If there were 20 coins in circulation and the market cap is 20 million dollars, and one coin is lost forever, doesn't that just make the market cap 19 million? and the remaining coins are still worth 1 million?

Or if there is only 19 coins, is each coin now worth 1.05 million? ( 20 million market cap divided by 19 remaining coins) because that doesn't make sense to me.