What is bitcoin? How it works, its supply cap and its price history

Bitcoin is a digital money that runs on a public network of computers instead of a bank or a government. Anyone can hold it, send it to anyone else on the network, and check the full history of every transaction ever made. No company issues it, and the rules for how many coins can ever exist are written into the software that every participant runs.

It was described in a short paper by the pseudonymous Satoshi Nakamoto in 2008, and the network started on January 3, 2009, the timestamp of its first block. Bitcoin is now an asset class of its own: it trades around the clock, it has US exchange-traded funds, and its price has risen more than 200-fold in our data since late 2014 while falling by more than 70% twice along the way.

This guide explains what bitcoin actually is, how the network agrees on who owns what, how the 21 million coin limit and the "halvings" work, what twelve years of monthly prices show, and the risks that come with holding it. It is educational: it doesn't forecast prices or argue that bitcoin is a good or bad holding.

What bitcoin is

Bitcoin is two things with one name. Bitcoin with a capital B usually means the network and its software. bitcoin, or BTC, is the unit that moves across it. Each coin divides into 100 million smaller units called satoshis, so the network can move amounts as small as 0.00000001 BTC. Buying a fraction is normal: at the October 29, 2026 close of $78,544.96, $100 buys about 0.00127 BTC.

What the network records is not coins in accounts but a chain of transactions. Each one says, in effect, "these previously received amounts now belong to this new address," and it is signed with the private key that controls the old address. Because every node keeps a full copy of the Blockchain, anyone can check that a coin being spent exists and hasn't already been spent. That check is the problem the 2008 paper set out to solve: how to stop the same digital money being spent twice without a trusted company in the middle.

Addresses are not names. The paper describes privacy as coming from keeping public keys anonymous, while every amount and every transfer stays visible to all. That makes the ledger transparent but pseudonymous: if an address is ever linked to a person, its whole history is linked too.

How the network agrees on the ledger

Proof of work is the key idea. Finding a valid block takes enormous numbers of guesses, but checking one takes a single calculation. To change an old transaction, an attacker would have to redo the work for that block and every block after it, faster than the rest of the network keeps adding new ones. The more blocks that pile up on top of a payment, the more expensive that becomes, which is why large transfers are usually treated as final only after several confirmations.

The pace is self-correcting. Every 2,016 blocks, the network compares how long those blocks took with the two-week ideal and adjusts the difficulty up or down, so blocks keep arriving about every 10 minutes on average whether miners add or remove machines.

Miners are paid in two ways. The first transaction in every block creates new coins for the miner, the block subsidy, and the miner also collects the fees attached to the transactions it includes. The paper expected fees to take over as the subsidy shrinks.

The supply schedule and the halvings

Bitcoin Core, the reference software, sets the subsidy with one rule: start at 50 BTC per block and cut it in half every 210,000 blocks. At 10 minutes a block, 210,000 blocks take about four years.

Each era creates half as many coins as the one before, so the total converges.

Because the software rounds each subsidy down to whole satoshis, the true ceiling is slightly lower: summing the code's own halvings gives about 20,999,999.98 BTC. Some coins are also lost forever when their keys are lost, so the usable supply is smaller still.

The halving makes new supply fall in steps, but it is known years in advance. Anything fully predictable can be priced in by buyers and sellers ahead of time, so the schedule on its own says little about what the price will do after any given halving.

Twelve years of price and drawdowns

The top panel uses a log scale, so equal vertical distances mean equal percentage moves. On that scale, bitcoin's path is a staircase of booms and busts rather than a smooth climb. The monthly close went from $338.32 in October 2014 to $78,544.96 on October 29, 2026, about 232 times. The highest monthly close in the data is $115,758.20 in July 2025.

The bottom panel shows how far the price stood below its previous peak at each month's end. The deep troughs are the story most charts of bitcoin's rise leave out:

• December 2017 → January 2019: $14,156 to $3,458, a 75.6% fall.
• October 2021 → December 2022: $61,319 to $16,548, a 73.0% fall.
• July 2025 → June 2026: $115,758 to $58,559, a 49.4% fall. At the end of October 2026 the price was still 32% below the July 2025 peak.

These are monthly closes; prices inside each month went lower and higher. Recovering from a 75% fall takes a 300% gain, and in both big episodes it took years. For how these swings compare with stocks day to day, see How crypto markets differ from stocks: hours, venues and volatility.

What drives the price

Bitcoin pays no dividends, earns no interest and has no earnings, so the valuation tools that work for stocks, such as Discounted cash flow (DCF): a step-by-step valuation on Apple or a Price-to-earnings ratio (P/E): formula, examples and limits, don't apply. Its price is simply what buyers will pay at the margin. Because new supply follows a fixed schedule and can't respond to demand, changes in demand show up almost entirely in the price.

What sets that demand is debated, and this page doesn't take a side. Observable inputs include flows into and out of exchange-traded funds, use of bitcoin as collateral and in trading, liquidity in the wider market and regulatory news. In our data, monthly returns of bitcoin and SPY had a correlation of 0.35 from January 2015 to October 2026: related, but loosely (see Correlation between asset classes: how it works and why it shifts).

Ways to own it

There are three common routes, each with different risks:

1. Directly, in a wallet you control. You hold the private keys, usually backed up as a seed phrase. Nobody can freeze the coins, and nobody can recover them if the keys are lost.
2. Through a crypto exchange or app. The company holds the keys for you. It's convenient, but you depend on the firm staying solvent and honest.
3. Through a spot bitcoin exchange-traded product. On January 10, 2024, the SEC approved the listing and trading of spot bitcoin ETP shares. These funds hold bitcoin and trade like stocks in an ordinary brokerage account, during market hours. The SEC said at the time that it was not approving or endorsing bitcoin itself. See How ETFs work: creation, redemption, NAV and the arbitrage band.

Crypto wallets and custody: keys, seed phrases, hot and cold storage compares the first two routes in detail.

Risks and limitations

• Volatility. Over the past year, bitcoin's daily moves annualized to about 44%, versus about 13% for SPY. Bitcoin.org's own FAQ calls the price very volatile.
• Irreversibility. A confirmed transfer can only be refunded by the person who received it. Sending to a wrong address or to a scammer is usually permanent.
• Lost keys. Coins whose keys are lost stay dormant forever.
• No deposit or broker protection. SIPC says it does not protect any digital or crypto asset that doesn't qualify as a security under its law, even at a member firm.
• Taxes. For US tax purposes the IRS treats digital assets as property, so selling, swapping or spending bitcoin can create a capital gain or loss.
• Energy and policy. Proof of work uses large amounts of electricity, and rules for mining, trading and custody vary by country and keep changing.

Bitcoin compared with neighbors

How Finabase does it

Finabase lists bitcoin as BTC.X, priced in US dollars. Its quote page shows the latest price with the day's change, range, volume and moving averages, plus a chart and news. Crypto has no financial statements, so the Financials, Valuation, Earnings and Options tabs are hidden for .X symbols. The chart tab draws bitcoin over the range you choose.

The crypto list puts bitcoin in a table of about 50 coins with returns over one week to two years, 52-week range, market cap and 50- and 200-day averages, and can switch to a map, a chart grid or a signals view. Finabase shows prices, not on-chain data such as hash rate, block counts or wallet balances. The chart on this page is built from the same price data, frozen on October 30, 2026.

Frequently asked questions

Who created bitcoin?

A person or group using the name Satoshi Nakamoto, who has never been publicly identified. The paper appeared in 2008, the network launched in January 2009, and bitcoin.org says Nakamoto left the project in late 2010.

Will there ever be more than 21 million bitcoins?

Not under the current rules. The supply limit comes from the halving schedule in the software, and changing it would require the people running the network to adopt different software, which the network's design makes very hard to impose.

What happens when all the bitcoin has been mined?

Miners would be paid only from transaction fees. At the current pace, the subsidy falls below one satoshi and stops after 33 halvings, more than a century from now.

Is bitcoin the same as a bitcoin ETF?

No. A spot bitcoin ETF is a fund that holds bitcoin and issues shares that trade on a stock exchange. You own fund shares, not coins: you can't send them on the bitcoin network, and the fund charges a fee and follows market hours.

Can a bitcoin transaction be canceled?

Not once it is confirmed. Only the recipient can send the money back, which is why payments to the wrong address or to fraudsters are usually lost.

Summary

Bitcoin is a public ledger kept in agreement by proof of work, with ownership proven by private keys and a supply schedule that halves new issuance every 210,000 blocks toward a cap just under 21 million coins. It pays no cash flows, so its price is set entirely by supply and demand, and that price has been extraordinarily volatile: up about 232 times on monthly closes from October 2014 to October 2026, with falls of 75.6%, 73.0% and 49.4% along the way. It can be held directly, through an exchange, or through a spot ETF since January 2024, and each route trades one set of risks for another. Coins held directly have no SIPC or FDIC protection, and US tax law treats them as property.