How Much is the Maximum Supply of Bitcoin?

Bittime - Bitcoin has a maximum supply that is limited to 21 million, making it a scarce asset. With the concept of bitcoin supply affecting the price of bitcoin, crypto investors must understand the mechanism behind this scarcity and its future implications.

The limited supply of bitcoin to 21 million tokens makes it unique among other financial assets. Since its creation, bitcoin has been the target of many investors, largely due to its limited supply.

In this article, we will explore why the number of bitcoins is limited, how the mining mechanism affects the supply, as well as its impact on the price of bitcoin in the market.

How Does Bitcoin Supply Work?

In 2009, when bitcoin was launched, the total supply of bitcoins that could be mined was set at a maximum of 21 million. Unlike fiat currencies that can be printed as needed, bitcoin was designed with a more complex system.

This is known as “Bitcoin halving,” which reduces the number of bitcoins miners can earn for each block they successfully mine.

Every 10 minutes, the bitcoin network creates a new block. Miners who successfully validate these blocks are rewarded in the form of new bitcoins.

This reward was originally 50 BTC per block, but thanks to the halving mechanism that occurs every four years, this reward has been reduced to 6.25 BTC per block and will be 3.125 BTC by 2024.

Also read: Post Bitcoin Halving: $BTC Price Could Reach $130,000 By 2025

Why is the maximum supply of bitcoin 21 million?

The concept of limited bitcoin supply is closely related to the vision of the creator, Satoshi Nakamoto. By limiting the maximum number of bitcoins, Nakamoto wants to make bitcoin a scarce asset, similar to gold.

This scarcity creates market dynamics that affect the price of bitcoin. Due to the limited number of tokens, the more people who want to own bitcoin, the higher the demand, and in turn, the price of bitcoin tends to rise.

The Impact of Halving on Bitcoin Supply and Price

Every time a halving occurs, the supply of bitcoin available for mining decreases. This results in less supply of bitcoin entering the market, while demand tends to increase, especially among investors who see bitcoin as a rare and inflation-proof asset.

This phenomenon often triggers a rise in the price of bitcoin after a halving event, as the decrease in the amount of supply in circulation increases its scarcity.

In addition, reducing the amount of bitcoin mined per block also requires miners to incur greater costs to run mining operations. This makes miners more selective in selling their assets, further depressing the supply of bitcoin in the market.

How Much Bitcoin Is in Circulation Now?

As of 2024, about 93.56% of the total bitcoin supply is already circulating in the market, or about 19.6 million BTC.

This means that less than 7% remains unmined, and this number will continue to decrease over time and with halving events. It is estimated that the supply of bitcoin will reach its maximum limit around 2140, when no new bitcoins will be mined.

However, within the amount in circulation, there are also bitcoins that are lost due to lost access or forgotten private keys. Estimates suggest that millions of bitcoins may no longer be accessible, so the actual usable bitcoin supply is much smaller than it appears.

Why does Bitcoin Supply Affect Bitcoin Price?

The limited supply of bitcoin makes the price of bitcoin very sensitive to market demand. When demand increases and supply remains constant, the price tends to rise, making bitcoin an attractive asset for many investors.

On the other hand, when demand decreases, the price of bitcoin can also be depressed. This mechanism is similar to the law of supply and demand in other assets, but with the uniqueness that the supply of bitcoin will never exceed 21 million tokens.

Demand is also influenced by various external factors, such as government policies, adoption of blockchain technology, and large institutional interest in bitcoin. For example, the SEC's announcement of a possible Bitcoin ETF approval could trigger a surge in demand, which would impact the price of bitcoin.

Also read: UK Starts to Look at Bitcoin Pension Funds as an Alternative

Will All Bitcoins Be Available on the Market?

Not all bitcoins that have been mined are in active supply. A large number of bitcoins are stored in wallets that have long been inactive or lost, such as Satoshi Nakamoto's wallet containing millions of bitcoins.

In addition, there are wallets that have been deliberately destroyed or have lost their access keys. These factors further reduce the actual supply of bitcoins available on the market, increasing the value of the asset as a scarce commodity.

When the supply of bitcoins reaches a ceiling of 21 million in 2140, miners will no longer receive new bitcoins in return. Instead, they will be rewarded in the form of transaction fees.

This system ensures that the bitcoin network remains operational without the need to print new tokens, which maintains the scarcity value of bitcoin in the long run.

Conclusion

The limited supply of bitcoin to 21 million tokens creates a unique market dynamic, where the supply of bitcoin is the main factor affecting the price of bitcoin. Each halving event reinforces the scarcity of bitcoin and magnifies its upside potential in the market.

With more than 19 million bitcoins already in circulation, and the maximum limit approaching, bitcoin is increasingly attractive to investors as an inflation-proof, high-value asset.

Understanding the supply of bitcoin and its impact on the bitcoin price is key for investors looking to capitalize on the opportunities of this crypto asset. With limited supply and growing demand, bitcoin continues to demonstrate its position as the premier digital asset of the modern financial era.

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