Apple is working on a fix for a bug in macOS Big Sur running on M1-equipped Macs that affects Bluetooth, one that causes peripherals including keyboards and mice to randomly disconnect.
Since the release of the M1 Mac mini, M1 13-inch MacBook Pro, and M1 MacBook Air, users have encountered issues connecting their Bluetooth devices to the Apple Silicon hardware. The problem, which included disconnections and even preventing some hardware from working at all, affected both third-party peripherals and Apple's accessories, such as the Magic Keyboard.
While it is possible to reset the Bluetooth in macOS Big Sur, there's no guarantee that it will solve the connectivity issue at hand.
In a tweet from The Atlantic writer Ian Bogost spotted by The 8-Bit, Apple is aware that there are connectivity issues, and that it is working on a solution. Bogost claims "Apple tells me a macOS fix is in progress and forthcoming just about anytime," which suggests an update is on the way, but not advising when it will be available.
Solved my M1 Mac Bluetooth issues by plugging in my keyboard and buying a Logitech mouse with its own Bluetooth dongle.— Ian Bogost (@ibogost) January 10, 2021
(Apple tells me a MacOS fix is in progress and forthcoming just about anytime. But jeez.)
Apple is currently beta-testing macOS Big Sur 11.2, which would be a probable avenue for the update to be distributed, but it's also possible for a separate update to be issued as part of a smaller update.
For the moment, users have to come up with temporary work-arounds, including using extra Bluetooth dongles to get around the built-in chip, though again these are apparently having mixed results.