Bitcoin is the largest and most discussed cryptocurrency to date. Investors frequently opt to buy Bitcoin when looking to make additions to cryptocurrencies, for it has proven its resilience and potential to generate profits over time, for those sticking to their long-term holding strategies. Despite all the presumptions that Ethereum might overtake it one day, this scenario is difficult, if not impossible, to come to reality. To surpass the premier digital coin and achieve the “flippening”, it would have to double its market capitalization, which is highly unlikely considering that Bitcoin stands at $515.54B. However, when investors and individuals unfamiliar with cryptocurrency draw comparisons between the two leading cryptocurrencies, there’s often a parallel between the possible limits they can reach regarding issuance. Ethereum lacks an explicit supply cap, whereas Bitcoin is designed never to cross a 21-million-coin boundary.

The nature of Bitcoin being mined until a supply of 21 million bitcoins raises numerous questions even among those well-versed in cryptocurrency. What happens after the last Bitcoin is launched? How will this impact the dynamics in the market? It’s only natural to try to debunk the mystery and cast light on the intricacies of this revolutionary technological advancement that’s stolen the show from other assets. This backgrounder will answer almost all of your questions about Bitcoin’s maximum supply and asses potential scenarios of this event.

Why can’t there be more than 21 million Bitcoins? Can it be surpassed?

Even if Bitcoin influenced the creation of the cohort of cryptocurrencies that emerged after its launch, a limited supply is not a rule governing all. Ethereum, for instance, has been governed by the proof-of-stake system since it underwent “the Merge” upgrade. On the other hand, Bitcoin is capped at 21 million, meaning that no other blocks will be added to the blockchain once the limit is reached. This can be seen as a double-edged sword.

On one hand, this aspect is intended to make the cryptocurrency resemble gold, art, diamonds, and other scarce assets. This limited supply is aimed at boosting the value of each Bitcoin in time if demand rises and the supply stays fixed. On the flip side, Bitcoin’s deflationary status may also result in hoarding and a reluctance to spend the cryptocurrency because potential buyers might think its value will only rise in the future. This reluctance may hamper the widespread adoption of the asset as a medium of exchange as people will hold on to it, waiting to value a fortune.

Bitcoin’s supposed creator, Satoshi Nakamoto, developed the asset with a specification in the source code that caps its supply at 21 million. Broadly, Bitcoin may only get close to this edge around the year 2140. But in fact, the numbers will hover above it. They’ll likely stand at 20,999,999.9796 BTC if we were to analyze its supply formula. So no, besides the fact that the limit can’t be surpassed, it won’t even be reached. 

Why “21” though?

Understandably, one may wonder what’s the catch with the “21” number. Some cryptocurrencies, such as Binance Coin (BNB), are capped at 200 million, a rounded figure. On the other hand, Cardano’s limit stands at 45 billion, which is still more than double that of Bitcoin. So, how did Satoshi Nakamoto come up with this number?

Some may think the number is chosen randomly after Bitcoin’s developer established the block reward will be halved on a four-year basis, and fresh blocks will be added to the chain at an average of 10 minutes. However, as Satoshi Nakamoto suggested, the supply was intended to match the M1 money supply of the U.S. dollar, euro, and other fiat money. At the time of Bitcoin’s development, that number was around 21 trillion, but since modifications can’t possibly be predicted, the inventor chose an approximate figure.

Another interesting factor is that this maximum matches the software’s design patterns. Every time 210,000 blocks are generated, the block rewards granted to miners are slashed in half, and halving occurs. This is an essential aspect of its algorithm and a significant milestone because it ensures that scarcity isn’t hampered.

What is the reason behind the halving?

The highly-debated halving is expected to preserve Bitcoin’s scarcity and keep inflationary pressure at bay. Besides the set maximum supply, this policy will ensure the amount of freshly mined Bitcoins breaking into the market is halved. Existing bitcoins are appreciated since the collection has been reduced.

The previous halvings have historically been linked with price increases for Bitcoin, which is one reason why people want to stack up on the asset before the event takes place. The latest halving occurred in 2020, when Bitcoin’s price revolved around $8,787. Over the following approximately six months, it rose in value to trade at almost $69,000. However, it’s very important to note that it’s not enough to look at past predictions and charts to better understand what will happen with the asset. Bitcoin is wrapped in volatility, just like any other cryptocurrency, and there aren’t trustworthy indicators that can disclose where the prices are heading. This is why it’s essential to weigh in more factors when deciding to take the leap, such as the amount you’d be comfortable losing in case the outcome isn’t as desired, the proportion of your asset that can accommodate Bitcoin, and for how long you want to keep it in your wallet.

Bitcoin’s halving never takes place precisely every four years, so you have plenty of time to make up your mind about your move. Next year, it is scheduled to take place on the 16th of April.

Despite rumors, Bitcoin will likely stick to its proof-of-work system.

Unlike Ethereum, which switched to a proof-of-stake system, taking mining out of the equation, Bitcoin’s situation differs. Voices say it can’t follow the path of Ethereum, but experts suggest this scenario could be doable. Bitcoin isn’t technically limited to the current mechanism that governs it. There are examples of cryptocurrencies other than Ethereum that took the same approach and moved to the proof-of-work type, such as Solana and Cardano. However, this exact feature secures the network’s safety and effectiveness. Proof-of-stake has several limitations that raise concerns regarding Bitcoin’s security, which are commonplace in centralized ecosystems and emphasize the reason why this cryptocurrency is doing just fine with its current consensus model.