Hi,
I haven’t tried against an encrypted drive (I assume you are using full disk encryption), so I don’t know what type of error would be seen.
Generally speaking, though, if the drive/volume where the odrive folder has been moved to becomes inaccessible, odrive will be unable to find the folder, and unable to create a new one. In that case it will present a [missing] state in the odrive tray menu by the “Open odrive folder” option. When you click on it, it will ask you if you want to locate the folder. If the drive/volume is restored and accessible, then clicking on that option will open the folder and odrive will be back in business.