Bitcoin explained: supply cap, halvings, mining, custody and spot ETFs

Bitcoin is the first cryptocurrency: a digital asset recorded on a public blockchain, secured by miners using proof of work, with a supply that its software limits to 21 million coins. New bitcoin enters circulation only as a reward for adding blocks, and that reward halves roughly every four years. Nobody issues it, nobody backs it, and its price is set entirely by what buyers and sellers agree on, which is why it can move so violently.

This guide covers how Bitcoin's supply works, what halvings change, how mining secures the network, the choices you face about custody, what spot Bitcoin ETFs are, and what has historically moved the price. If you are new to the subject, start with what is cryptocurrency.

Risk first. Bitcoin's price has fallen by more than 70% from a previous high on several occasions. You can lose all of the money you put in. If you trade bitcoin through CFDs, leverage magnifies losses, and most retail CFD accounts lose money. Nothing in this guide is a forecast or a recommendation.

A short history

Bitcoin was described in a nine-page paper, "Bitcoin: A Peer-to-Peer Electronic Cash System", published on 31 October 2008 under the name Satoshi Nakamoto. The identity of Satoshi Nakamoto has never been confirmed. The network went live on 3 January 2009, when the first block, known as the genesis block, was mined with a reward of 50 bitcoin.

For its first years Bitcoin was traded mainly by enthusiasts on small, lightly run exchanges. The failure of Mt. Gox, then the largest exchange, in early 2014 was the first of several episodes in which customers lost access to coins held on a platform. Since then Bitcoin has gone through repeated cycles of sharp rises and deep falls, alongside a gradual build-out of regulated access through futures, exchange-traded products and, in the US since January 2024, spot ETFs.

The supply cap and how new coins are created

Bitcoin's software sets a hard limit: there will never be more than 21 million bitcoin. Each bitcoin divides into 100 million units called satoshis, so prices can be quoted and coins can be sent in very small amounts.

New coins are not sold by anyone. They are created in each new block as the block subsidy, paid to whichever miner adds that block. The network targets one block about every ten minutes on average. To keep that pace as more or less computing power joins, the software adjusts the puzzle's difficulty every 2,016 blocks, roughly every two weeks.

Because the subsidy keeps halving, issuance slows over time. The 20 millionth bitcoin was mined in March 2026, so roughly 95% of the eventual supply already exists. The last fractions are expected to be issued around the year 2140. After that, miners would be paid by transaction fees alone.

The 21 million figure describes coins issued, not coins usable. Some bitcoin has been lost for good through forgotten keys, discarded hard drives and coins sent to unusable addresses. Estimates of how much vary widely, so treat any single number you see with caution.

Halvings: what actually changes

Every 210,000 blocks the block subsidy halves. At ten minutes per block that is about four years, although the real dates drift because blocks are sometimes faster or slower than the target.

1. November 2012 (block 210,000): 50 to 25 bitcoin per block.
2. July 2016 (block 420,000): 25 to 12.5.
3. May 2020 (block 630,000): 12.5 to 6.25.
4. April 2024 (block 840,000): 6.25 to 3.125.

The next halving is expected around 2028, at block 1,050,000, when the subsidy would fall to 1.5625 bitcoin. The date depends on how fast blocks are actually found.

Worked example: issuance before and after a halving

An illustrative calculation, assuming exactly 144 blocks a day (24 hours times six blocks an hour):

• Before April 2024: 144 times 6.25 = 900 new bitcoin a day.
• After April 2024: 144 times 3.125 = 450 new bitcoin a day.
• Over a year, that is roughly 164,000 new coins instead of roughly 328,000.

That is the whole mechanical effect of a halving: the flow of new coins to miners is cut in half overnight. Demand does not change on the day.

The halving and the price

You will often read that halvings drive the price higher. Be careful with that claim. There have been only four halvings, which is far too few to draw reliable statistical conclusions, and each one coincided with very different conditions in interest rates, regulation and market structure. Some investors argue that a smaller flow of new supply matters over time; others argue that the halving date is known years in advance, so any effect should already be in the price. History shows large moves in both directions in the months and years around halvings. It does not show a reliable pattern you can trade on.

Mining: how the network is secured

Mining is the process that orders transactions and adds them to the blockchain. Specialised computers repeatedly run a hashing function (SHA-256) over a candidate block, changing a small number each time, until the result falls below a target set by the difficulty. Finding a valid result takes enormous numbers of attempts; checking it takes one.

The miner who finds a valid block earns the subsidy plus the fees paid by the transactions included in it. Other nodes check the block and, if it follows the rules, build the next one on top of it. If two miners find blocks at almost the same moment, the network briefly has two competing chains; the one that gets extended first wins and the other block is discarded. This is why exchanges wait for several confirmations, meaning several later blocks, before crediting a deposit.

The design makes cheating expensive. Rewriting recent history would require controlling more computing power than the rest of the network combined and spending heavily on electricity to do it. The flip side is the network's substantial energy consumption, which is a recurring source of political and environmental criticism.

Mining economics in brief

Miners' revenue is the subsidy plus fees, both paid in bitcoin, so it depends on the bitcoin price. Their costs are mainly electricity and hardware. Each halving cuts the subsidy part of revenue in half, which squeezes miners with higher costs. Over the very long run, the network's security budget will depend increasingly on transaction fees, and whether fees will be enough is an open question among researchers.

Custody: who holds the keys?

Owning bitcoin means controlling the private key that can sign a transaction moving it. You have three broad choices.

• Leave it with a platform. The exchange or broker holds the keys and owes you the coins. It is convenient, but you are exposed to the platform being hacked, freezing withdrawals or failing. Crypto held on a platform is generally not covered by deposit protection schemes.
• Self-custody in a software wallet. An app on your phone or computer holds your keys. You are in control, but malware, phishing and lost devices are real risks.
• Self-custody in a hardware wallet. A dedicated device keeps keys offline and signs transactions without exposing them to your computer. It is more secure against remote attacks, but you must still protect the seed phrase, the words that can recreate your keys.

With self-custody there is no password reset. Lose the seed phrase and the coins are gone; reveal it and someone else can take them. Our guide to crypto wallets and custody explains the trade-offs and the common mistakes.

Trading a bitcoin CFD sidesteps custody entirely, because you never own the coin. Instead you take on the broker as your counterparty, along with leverage and financing costs. See crypto CFDs vs buying crypto.

Spot Bitcoin ETFs

On 10 January 2024 the US Securities and Exchange Commission approved the listing of 11 spot Bitcoin exchange-traded products, and trading began the next day. These funds hold bitcoin directly (through a custodian) and issue shares that trade on US stock exchanges, so investors can get price exposure through an ordinary brokerage account without handling keys.

A few points worth understanding:

• Approval is not endorsement. When it approved the products, the SEC's chair stated publicly that the agency was not approving or endorsing bitcoin itself. The funds carry the same price risk as the coin.
• Fees and tracking. ETFs charge an annual fee, and the share price can drift slightly from the value of the bitcoin held, especially when US markets are closed but bitcoin keeps trading.
• Trading hours. The ETF trades only during exchange hours, while bitcoin trades all week. A move over a weekend shows up as a gap when the ETF reopens.
• Availability in Europe. EU retail investors often cannot buy US-listed ETFs because they lack the key information document required under the PRIIPs rules. European products giving bitcoin exposure are typically structured as exchange-traded notes or similar products, which carry issuer risk. Our guide to ETFs explained covers the general issue.

Before 2024, regulated access in the US came mainly through CME bitcoin futures, which have traded since December 2017, and through trusts and futures-based funds.

What has historically moved the price

Without earnings or interest to anchor it, bitcoin's price has been driven by shifts in demand, liquidity and sentiment. The factors below are descriptions of the past, not a guide to the future.

Liquidity and interest rates

Bitcoin has often traded like a high-risk asset. In 2022, when central banks raised interest rates quickly to fight inflation, bitcoin fell heavily alongside technology shares. Periods of easy money have tended to coincide with stronger demand for speculative assets in general. Our guide to central banks and interest rates explains how rate expectations ripple through markets.

Access and market structure

New ways to buy, such as regulated futures and then spot ETFs, have widened the range of people able to buy and changed who holds the asset. Flows into and out of these products are now watched closely by traders.

Platform failures and leverage

Collapses of lenders and exchanges, most notably in 2022, forced selling and damaged confidence across the whole market. Leverage on offshore platforms amplifies moves through cascades of forced liquidations.

Regulation and policy

Bans, approvals, enforcement actions and tax changes in major economies have moved the price, sometimes by large amounts in a day.

Sentiment and narratives

Stories such as "digital gold" or "inflation hedge" attract buyers when they are in fashion and lose force when they are not. Some investors argue bitcoin can act as a store of value because of its fixed supply. The record so far is mixed: bitcoin fell sharply during the high-inflation period of 2022, and its price has repeatedly lost more than half its value within months. Treat such labels as opinions to be tested, not facts.

Trading bitcoin through CFDs

If you trade bitcoin CFDs with an EU-regulated broker as a retail client, ESMA rules cap leverage at 2:1, so margin is at least 50% of the position's value. In the UK, crypto derivatives cannot be sold to retail clients at all.

Worked example: a bitcoin CFD at 2:1

Illustrative numbers only. Bitcoin is quoted at 60,000 dollars and you buy a CFD for 0.05 bitcoin.

• Exposure: 0.05 times 60,000 = 3,000 dollars. Margin at 2:1 = 1,500 dollars.
• A 10% fall to 54,000 dollars costs 0.05 times 6,000 = 300 dollars, which is 20% of your margin, before spread and financing.
• Suppose the broker charges financing at an annual rate of 10% on the full exposure. Holding for 30 days costs about 3,000 times 10% times 30 divided by 365, roughly 25 dollars, whatever the price does.

Bitcoin can move 10% in a day. Set your size from the distance to your stop and the money you are prepared to lose, using a position size calculator, and check margin with the crypto margin calculator. Our guide to crypto volatility and risk goes further.

Common mistakes

• Treating the halving as a buy signal. Four data points are not a law of nature.
• Keeping large amounts on an unvetted platform. Check authorisation on the regulator's register first; our regulator registers page lists where.
• Storing a seed phrase digitally. Photos, cloud notes and emails are common sources of theft.
• Confusing an ETF, a CFD and the coin. They have different costs, hours, protections and risks.
• Ignoring weekend gaps. On CFDs that pause at weekends, the price can reopen well past your stop. See gap risk and weekend risk.
• Believing promises of returns. Anyone promising fixed or high returns from bitcoin is a red flag; see crypto scams and regulation.

Frequently asked questions

How many bitcoin are there?

The software limits total supply to 21 million. The 20 millionth bitcoin was mined in March 2026, and the remaining coins will be issued ever more slowly until around 2140. Some of the coins already issued are permanently lost, though estimates of how many vary.

When is the next Bitcoin halving?

Halvings happen every 210,000 blocks, so the next one is due at block 1,050,000, expected around 2028. The exact date depends on how quickly blocks are mined, and the reward will fall from 3.125 to 1.5625 bitcoin per block.

Does the halving make bitcoin go up?

Nobody can say that it does. There have only been four halvings, each in very different market conditions, and the date is known in advance. Prices have moved sharply in both directions around past halvings.

Who controls Bitcoin?

No single company or government. Changes to the rules require broad agreement among developers, node operators, miners and users, which makes the protocol slow to change. That does not protect you against platforms, scams or price falls.

Is a spot Bitcoin ETF safer than owning bitcoin?

It removes the job of managing keys and is traded through a regulated stock market, but the price risk is the same as holding bitcoin, and you pay an annual fee. EU retail investors usually cannot buy US-listed ETFs.

What is a satoshi?

The smallest unit of bitcoin: one hundred-millionth of a bitcoin. Prices of small purchases and fees are often expressed in satoshis.