(The Bitcoin Reserve Act) could break the halving cycle. Will this four-year cycle unfold differently? Will we enter a mythical supercycle?
Article author: Daniel Ramirez
Source: Cointelegraph
Article translated by: Ada, MetaEra
Increasing speculation suggests that the incoming president Donald Trump may sign an executive order on his first day in office to announce the establishment of a Bitcoin reserve, or establish reserves through legislation during his term, with many wondering if this move could lead to a supercycle for cryptocurrencies.
Since Wyoming Senator Cynthia Lummis proposed the (Bitcoin Reserve Act) earlier this year, states like Texas and Pennsylvania have also introduced similar proposals. Reports suggest that Russia, Thailand, and Germany are also considering their proposals.
If governments are competing to reserve Bitcoin, will we bid farewell to the four-year boom and bust cycle caused by Bitcoin halvings?
Iliya Kalchev, an analyst at cryptocurrency lending institution Nexo, believes that "(the Bitcoin Reserve Act) could be a milestone for Bitcoin, marking its recognition as a legitimate global financial instrument."
The Bitcoin bill proposed by Lummis in 2024 would incorporate Bitcoin into the U.S. Treasury as a reserve asset. Under the proposal, the U.S. government would acquire 200,000 Bitcoins annually over five years, ultimately accumulating 1 million Bitcoins. The government would then hold these Bitcoins for at least twenty years.
Jack Mallers, founder and CEO of Strike, believes that Trump "may leverage an executive order on day one to purchase Bitcoin," but he warns that this does not equate to buying 1 million Bitcoins.
Dennis Porter, co-founder of the non-profit Satoshi Act Fund, also believes that Trump is exploring the possibility of establishing a strategic Bitcoin reserve through executive orders.
As of now, Trump's team has not directly confirmed the executive order claims, but when Trump was asked in an interview with CNBC whether the U.S. would create a Bitcoin reserve similar to the Strategic Petroleum Reserve (which might require legislation), he replied, "Yes, I think it will."
However, executive orders lack stability, as subsequent presidents often overturn such orders. The only way to ensure that strategic reserves of Bitcoin have a future is through legislation that gains majority support.
With Republicans dominating Congress and holding a slim majority in the Senate, Bitcoin supporters within Trump's team have a solid foundation to push Lummis's bill. However, as soon as a few Republican senators are swayed by progressive outrage over the so-called 'transfer of government wealth to Bitcoin holders,' it could derail the bill.
Earlier this month, Alex Krüger, founder of macro digital asset consulting firm Asgard Markets and economist, stated that the election results have led him to believe that "Bitcoin is very likely to enter a supercycle."
He believes that Bitcoin's unique situation can be compared to gold's rise from 1971 to 1981, when, after U.S. President Richard Nixon abandoned the gold standard and ended the Bretton Woods system, gold prices soared from $35 per ounce to $850.
Krüger does not rule out the possibility of Bitcoin experiencing a bear market as it has in the past. However, he urges cryptocurrency investors "not to compare this cycle with previous cycles," as this one may be different.
Trump's actions so far undoubtedly indicate that the government will make favorable progress in the future. After Gary Gensler's departure, he nominated Paul Atkins, a supporter of cryptocurrencies and deregulation, to chair the U.S. Securities and Exchange Commission.
He also nominated Scott Bessent, a supporter of cryptocurrencies, as Secretary of the Treasury and appointed former PayPal COO David Sacks as the czar of AI and cryptocurrencies, responsible for establishing a clear legal framework for the cryptocurrency industry.
The supercycle theory has never achieved super results.
However, the concept of 'this cycle is different' has emerged in every Bitcoin bull market in the past, each time supported by narratives of mainstream and institutional adoption.
During the bull market of 2013-2014, the supercycle theory was supported by the perspective that Bitcoin, as an alternative asset to fiat currency, would gain international attention.
In the 2017-2018 cycle, the rapid rise in prices was seen as a sign that Bitcoin was beginning to gain mainstream acceptance, and institutional interest would flourish.
During the 2020-2021 cycle, when tech companies like MicroStrategy, Square, and Tesla entered the Bitcoin market, they believed many tech-related companies would follow suit.
However, in each cycle, the narrative of the supercycle has not materialized, ultimately leading to price crashes, with supporters being eliminated and entering a long bear market.
Su Zhu, co-founder of Three Arrows Capital, is one of the most prominent supporters of the supercycle theory in 2021, believing that without a sustained bear market, the cryptocurrency market will remain bullish, and Bitcoin will eventually peak at $5 million.
3AC clearly borrowed heavily, believing in the truth of the supercycle theory, and when it was finally liquidated, the total market capitalization of the cryptocurrency market plummeted by nearly 50% in the wake of that news, leading to bankruptcies or financial struggles for lending institutions including Voyager Digital, Genesis Trading, and BlockFi.
Therefore, the supercycle is a dangerous theory that is not worth betting your life savings on.
For Chris Burniske, a partner at venture capital firm Placeholder and former head of blockchain products at ARK Invest, the Bitcoin supercycle is a myth.
Nevertheless, the results of the U.S. elections overwhelmingly provide Bitcoin with unprecedentedly favorable conditions, especially considering the new president's support. Trump seems to be fulfilling his promise to support cryptocurrencies, including a commitment never to sell the U.S. Bitcoin reserves.
Potential global domino effect
If the (Bitcoin Reserve Act) passes, it could trigger a global race to hold Bitcoin, with other countries following suit to avoid falling behind.
George S. Georgiades is a lawyer who transitioned from providing financing advice to Wall Street firms to serving the cryptocurrency industry in 2016. He told Cointelegraph that enacting the (Bitcoin Reserve Act) "will mark a turning point for global adoption of Bitcoin" and could "trigger other countries and private institutions to follow suit, driving broader adoption and enhancing market liquidity."
Basel Ismail, CEO of crypto investment analysis platform Blockcircle, agrees, saying that approving the bill would be "one of the most favorable events in crypto history," as "it would catalyze a race to acquire as much Bitcoin as possible."
He believes that "most of the countries in the G20, that is, the most powerful and economically advanced countries in the world, will follow suit and establish their own reserves."
Veteran cryptocurrency investor and Bitcoin educator Chris Dunn told Cointelegraph that a competitive buying frenzy among countries based on FOMO (fear of missing out) could fundamentally change the current cryptocurrency market cycle.
Hong Fang, president of the OKX exchange, told Cointelegraph that other countries may already be prepared for such a competition.
However, Ismail stated that most Bitcoin purchases will occur through over-the-counter brokers and settle in large transactions, so "it may not have a direct impact on Bitcoin's price," but will create a lasting demand force that eventually drives up Bitcoin's price.
A new wave of cryptocurrency investors may change the dynamics of the cryptocurrency market.
If a nation becomes a market buyer, the Bitcoin market could undergo fundamental changes. A new wave of investors from global financial centers will flood into the cryptocurrency market, altering market dynamics, psychology, and reactions to certain events.
Nexo analyst Kalchev states that while this legislation could disrupt the well-known four-year halving cycle of Bitcoin, several dynamic changes could indeed occur.
Bitcoin is a unique market, driven so far by retail buying and selling, with prices highly sensitive to market changes. The emergence of new types of investors may change market dynamics and alter historical cycles.
Ismail believes that "investor behavior in the stock market will differ from" the overreacting retail investors. Institutional investors possess substantial capital and advanced risk management strategies, enabling them to treat Bitcoin differently than retail investors.
The so-called 'stability' means that market volatility may decrease, thus preventing price drops during bear markets from being as severe as in previous cycles.
Georgiades believes that "price cycles will continue to exist," but "the sustained demand from large-scale buyers like the U.S. may reduce volatility while also reducing the significant price fluctuations we have witnessed in previous cycles."
Meanwhile, Ismail pointed out that the Bitcoin market has shown a completely different trajectory compared to the previous four-year cycles. In the current cycle, Bitcoin's price fell below the historical peak of the last cycle (ATH), "which was widely considered impossible," and then, before the official halving occurred, Bitcoin reached a new historical high.
So far, Bitcoin has only undergone four halvings, with nearly thirty more halvings yet to occur. "It's hard to imagine that all these halvings will follow the same predictable four-year cycle pattern," Kalchev said, especially as broader macroeconomic and political factors—such as central bank policies and regulatory developments—will have more significant impacts on Bitcoin's market trajectory.
Kalchev believes that as macroeconomic policies, political events, and other external factors exert greater influence over Bitcoin's market trajectory, the price movements of Bitcoin will gradually deviate from the previous halving cycle patterns.
