I was playing in version 0.16.1. I took my axe to upgrade it to bronze axe. I updated the game to 0.16.3 (while I was waiting for the axe to be ready). And now my axe is gone. I don't have it. The blacksmith doesn't have it. I even played a couple more days just in case and nothing. (I checked all my boxes at home).

Looks like you found a loophole in the code. This is due to the NPC reset that’s been happening on the 0.16 versions. Looks like if you patch on the final day before your upgrade it will cause you to lose the tool due to some things being reset. Tell you what, I don’t want to post it here but shoot me an email at this address <edited>.