Jasmine Birtles
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Understanding Bitcoin: Why This Crypto has Limited Supply
Ruby Layram
6th Feb 2025
Bitcoin seems to be just about everywhere at the moment, doesn’t it? Whether you’re at a dinner party, scrolling through social media, or reading the financial news, someone is bound to start talking about it.
What some people don’t talk about, however, is that Bitcoin can’t be “printed” like fiat currencies to create more.
In this guide, we will take a look at exactly why Bitcoin is becoming more limited in supply by the day!
What is Bitcoin?
Before we get into why Bitcoin is limited in supply, let’s start with the basics. What is Bitcoin?
Bitcoin is a type of cryptocurrency, which means it’s a digital currency that operates without a central authority, like a government or bank.
Instead, Bitcoin transactions are verified by a network of computers using blockchain technology. Think of it as a giant, public spreadsheet where every Bitcoin transaction ever made is recorded.
Unlike the pound in your wallet, Bitcoin isn’t created by a central bank. Instead, it’s “mined” by computers solving complex mathematical puzzles.
When a puzzle is solved, a new Bitcoin is created and added to the system. But, there’s a cap on how much Bitcoin can ever exist, and this is what causes its supply to decrease over time.
3 Reasons Why Bitcoin has limited supply
Bitcoin became popular for several reasons with one being investors believe it solves the problem of inflation, which causes traditional money to lose buying power. Its scarcity is built into its very design, and there are three main reasons why this is happening:
1. Bitcoin has a limited supply
The supply of Bitcoin is finite (a fancy word for limited). There will only ever be 21 million Bitcoins in existence. That’s it. Full stop. No more can be created after that limit is reached.
Why 21 million? Well, this was decided by Bitcoin’s mysterious creator (or creators), known only as Satoshi Nakamoto. They built this limit into the system to mimic the scarcity of precious metals like gold. This is why Bitcoin is sometimes referred to as ‘digital gold’. Crypto is generally very volatile, with the risk of abrupt market changes, corporate collapse, inadequate client fund segregation, and cyberattacks.
To put this into perspective,at the time of writing this post, over 19 million Bitcoins have already been mined. That means more than 90% of the total supply is already out there in circulation.
And the closer we get to that 21-million mark, the more limited in supply Bitcoin becomes.
Why is this important?
When something is limited, and demand for it increases, its price tends to go up. It’s like how a rare vintage wine or a limited-edition piece of artwork can fetch such high prices. The same principle applies to Bitcoin.
2. Bitcoin Halving
Now that we’ve covered the basics, here’s where it gets even more interesting. Every four years or so, an event called Bitcoin halving takes place.
When this event occurs, the reward for mining Bitcoin gets cut in half. When Bitcoin was first launched in 2009, miners were rewarded with 50 Bitcoins for solving a block.
In 2012, this reward was halved to 25 Bitcoin. Then in 2016, it dropped to 12.5 Bitcoin, then in 2020, it halved to 6.25 Bitcoin.
And now, after the recent halving in April 2024, the mining reward is 3.125 Bitcoin.
The next halving is expected to happen in 2028, and the reward will drop to just 1.5625 Bitcoin per block. This process will continue until the last Bitcoin is mined.
Why does halving matter?
Halving slows down the rate at which new Bitcoin is created. Imagine a tap that starts dripping slower and slower over time. With each halving, the supply of new Bitcoin decreases, making it limited in supply and potentially more valuable.
For example, after the 2020 halving, Bitcoin’s price skyrocketed from around $9,000 to over $60,000 within a year. However, this could have been due to other factors in the market and there is no guarantee that the price of Bitcoin will go up after every halving event.
While other factors also influenced this price surge, halving played a key role by reducing the supply of new Bitcoin.
3. Increasing Investor Demand
The third reason Bitcoin is limited in supply is that more people want it. And when we say “people,” we don’t just mean just tech enthusiasts or crypto nerds, this also includes institutional investors, big companies, and even governments.
Over the past few years, major companies, like Tesla, have added Bitcoin to their balance sheets. Investment firms and banks have also jumped on the trend, launching the first wave of Bitcoin ETFs (funds that track the value of Bitcoin) at the beginning of 2024.
In the UK, platforms like CoinJar and Archax have made a user-friendly platform for everyday investors to buy Bitcoin. As more people view Bitcoin as a promising investment opportunity the demand keeps growing.
When Will the Last Bitcoin Halving Be?
If halving happens every four years and the supply keeps decreasing, you might be wondering, when will it all stop? Well, the final Bitcoin halving is expected to occur around 2140, which is over 100 years from now.
By then, the mining reward will be so small that it’s barely noticeable. However, the impact of the halving will continue to affect the price and limited supply of Bitcoin.
Will the Supply of Bitcoin Ever Run Out?
Technically, no. Even when we hit the 21-million limit, Bitcoin won’t “run out.” The existing Bitcoins will simply continue to circulate. However, they might not be available to buy.
There is a chance (albeit quite a small one) that, at some point, all 21 million Bitcoins will be either owned or lost. This will mean that they are inaccessible through the market.
It’s estimated that around 3.8 million Bitcoins are already lost forever. This happens when people lose access to their digital wallets or forget their private keys.
Remember that story about the bloke in Wales who accidentally threw away a hard drive containing £150 million worth of Bitcoin? Cases like that contribute to Bitcoin’s limited supply.
The good news is that Bitcoin is divisible. You don’t need to own a whole Bitcoin to invest. Each Bitcoin can be broken down into 100 million smaller units called satoshis.
So even if Bitcoin’s price shoots to £1 million per coin, you can still buy a fraction of it. Unfortunately, there is no guarantee the price of Bitcoin will increase or maintain its current value in the future.
What Happens When All Bitcoin is Mined?
So, what happens in 2140 when the last Bitcoin is mined? Does the whole system stop?
The short answer is no. Although, we can’t predict the future!
Once all the Bitcoin is mined, miners will no longer earn rewards from creating new Bitcoin. Instead, you could assume that they’ll rely on transaction fees for their income. Mining could become more about maintaining the blockchain rather than adding new coins to it.
Or it could have substantially lost its value, remember crypto investments are extremely volatile and suspect to inherent risks dissimilar to other investments.
With no new coins being brought into circulation, investors may trade Bitcoins amongst each other and the value of Bitcoin will rely solely on demand.
Final Thoughts
Limited supply is one of Bitcoin’s biggest selling points and what sets Bitcoin apart from traditional cash . Although it could substantially lose its value, remember crypto investments are extremely volatile and exposed to inherent risks dissimilar to other traditional investments.
Bitcoin’s limited supply can be put down to regular halving events and increasing investor demand. As the supply of Bitcoins decreases, there will be fewer Bitcoins available for investors to buy.
Of course, there is no guarantee that the demand for Bitcoin will continue growing. New crypto projects enter the market daily and coins like Ethereum and Ripple pose prominent competition to Bitcoin.
| Remember: |
| Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 minutes to learn more: www.coinjar.com/uk/risk-summary. |
| The above article is not to be read as investment, legal or tax advice and it takes no account of particular personal or market circumstances; all readers should seek independent investment advice before investing in cryptocurrencies. The article is provided for general information and educational purposes only, no responsibility or liability is accepted for any errors of fact or omission expressed therein. Past performance is not a reliable indicator of future results. |
| UK residents are required (in accordance with local legislation) to complete an appropriateness assessment to show they understand the risks associated with what crypto/investment they are about to buy and enabling CoinJar to categorize them as an investor. New customers are also required under local regulations to wait 24-hours as a “cooling off” period (from account creation), before their account is active (i.e. to deposit, trade, withdraw etc.). |
| Cryptocurrency is currently not regulated in the UK. It’s vital to understand that once your money is in the crypto ecosystem, there are no rules to protect it, unlike with regular investments. You should not expect to be protected if something goes wrong. So, if you make any crypto-related investments, you’re unlikely to have recourse to the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS) if something goes wrong. |
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