The scheduled supply reduction
Bitcoin's monetary policy is coded and deterministic. Miners earn block rewards for validating transactions (currently 6.25 BTC per block, down from 12.5 in 2020 and 25 before that). Every 210,000 blocks (roughly 4 years at 10-minute intervals), the protocol automatically cuts this reward in half. This halving is not a market event or a vote; it is mathematically guaranteed by the software.
There have been four halvings so far: 2012 (50 to 25 BTC), 2016 (25 to 12.5 BTC), 2020 (12.5 to 6.25 BTC), and 2024 (6.25 to 3.125 BTC). After the final halving (estimated around 2140), no new Bitcoin will be created, and miners will earn only transaction fees. This creates a fixed supply of 21 million Bitcoin, making Bitcoin the only currency whose total supply is absolutely capped by code.
Market impact and miner economics
Halving events are economically significant: overnight, miner income per block drops 50%. Less profitable mining operations shut down, temporarily reducing network hashrate and difficulty, until the remaining miners adjust. In the long term, Bitcoin price often appreciates around halving events (though this is correlation, not guaranteed causation), offsetting the reduced block reward. The halving is a known catalyst, so markets often price it in months in advance.