Circulating Supply vs Maximum Supply of Bitcoin

Understanding Bitcoin Supply: Circulating vs Maximum Supply

It is crucial to understand the difference between the coins currently in existence and the final number that will ever exist to understand Bitcoin's future economic model. Instead of speculating, the metrics of supply allow individuals to make decisions based on verifiable, enforceable information at the protocol level.

Supply indicators serve as a mechanism for interpreting patterns related to scarcity. This paper will discuss how issuances and absolute constraints interact to shape the economy surrounding Bitcoin and provide information on the predictable supply mechanisms related to market behaviour.

Why Your Share of the 21 Million Matters

Visualise Bitcoin as a pie chart, with its digital slices. A fraction of a coin purchase entitles the holder to a claim on a fixed resource on a limited network. This contrasts with fiat money. The supply of fiat money can be increased according to policies formed. This is not the case with Bitcoin. This predictability fosters an environment in which dilution expectations are well known in advance. The circulating supply is the number of coins currently in circulation and flowing in the market. The significance of tracking the bitcoin price today is that it reflects the relationship between the current supply and demand in the real-world market, with up-to-date pricing commonly monitored via major exchanges such as Binance. As of June 2025, there are more than 19.8 million coins in circulation, which is more than 94% of the total potential supply.

A Built-in Scarcity Engine

It may seem counterintuitive that Bitcoin will continue issuing new coins until around 2140, when most of the supply already exists. This extended timeline is the result of a deliberately slowed issuance mechanism rather than delayed distribution.

This is because the reward for each block is reduced by half every 210,000 blocks. The effect is that the rate at which new coins are generated is reduced. Each halving makes the new coins even more dependent on existing coins in circulation than on new ones.

Following the 2024 halving, daily issuance dropped to roughly 450 BTC. As a result, Bitcoin’s annual supply expansion rate has fallen below that of many traditional scarce assets. When new supply growth slows while demand remains active, value dynamics increasingly depend on scarcity rather than issuance volume.

Maximum Supply and the End of Inflation

This 21-million-cap determines the basic economic model for Bitcoin. This ceiling ensures that the supply does not exceed a fixed amount, thereby eliminating any uncertainty related to monetary policy in the long run. This ceiling will be implemented within the basic framework of Bitcoin and will be determined by code rather than discretion.

This has consequently started to capture the attention of institutional investors regarding this factor. This is because, instead of focusing on price patterns, institutional investors assess Bitcoin's value based on its fixed supply.

There will be a conclusive point beyond which there shall be no further inflation related to the issuance of coins. There shall consequently be a fixed digital economy based on Bitcoin. The supply patterns shall be entirely dependent on transactions rather than expansion at this point. This is the first monetary system in the global economy subject to this strict rule.

The Mystery of the "Ghost" Supply

A common misconception is that all circulating coins are actively available in the market. In practice, the accessible supply is considerably smaller. Since Bitcoin’s early years, a significant number of coins have really become permanently inaccessible due to lost credentials, damaged hardware, or long-abandoned wallets.

These coins still appear in headline supply figures, yet they exert no real influence on day-to-day liquidity or trading dynamics.

Several factors reduce the actively tradable supply:

• Satoshi’s early holdings that have remained unmoved for over a decade

• Coins lost through forgotten keys or discarded storage devices

• Long-term holdings secured in cold storage with no near-term intent to sell

Excluding these inactive coins, the liquid supply appears more limited than headline figures indicate. As a result, market activity really focuses on a smaller pool of available units, so price discovery is really driven by competition over structural scarcity rather than apparent scarcity.

Navigating the Future Supply Landscape

As the supply in circulation approaches the final limit, the economic dynamics of Bitcoin are about to change. Incentives for mining will shift from block rewards to transaction fees, thereby securing the usage-based security model in place.

The increase in transactions makes it easier for the change to occur, as it provides sustainable sources of income. It also makes clear that the network's security plan shall not rely on newly mined coins after a specific period, but instead shall rely on the network's activities.

A supply-based approach rather than a price-based one can therefore aid in estimating structural scarcity. This is because the underlying model and framework of Bitcoin are shaped and guided by the fundamental vision of enhancing the predictability and sustainability of the new breed of digital currencies.