President-elect Donald Trump has said he will sign an executive order to create a Bitcoin reserve on his first day in office. This has left many wondering how it could impact crypto’s current four-year boom-bust cycle and lead to a crypto supercycle.
Earlier this year, Wyoming Senator Cynthia Lummis introduced the Bitcoin Reserve Act. Texas and Pennsylvania have also introduced proposals to establish a state Bitcoin reserve.
Can A Bitcoin Reserve Impact Current Cycles?
Besides the US, several countries like Russia, Germany, and Thailand are contemplating similar proposals. If governments attempt to create a stockpile of Bitcoin (BTC), could it impact crypto prices and the four-year boom-bust cycle attributed to Bitcoin's halving event? Some analysts like Iliya Kalchev believe the Bitcoin Reserve Act could be a landmark moment for Bitcoin and signal its recognition as a legitimate financial instrument. Bitcoin has already garnered significant attention from major financial institutions, who have started adding it to their reserves. Kalchev stated,
“Every Bitcoin cycle has a narrative trying to push the idea that ‘this one is different.' The conditions have never been so ideal. Crypto has never had a pro-crypto US President who controls the Senate and the Congress.”
The Bitcoin Reserve Act would allow the US government to add Bitcoin to its treasury as a reserve asset. The act states that the government must buy 200,000 BTC annually over five years and hold the asset for at least twenty years. Jack Mallers, founder and CEO of Strike, believes Trump could issue an executive order to purchase Bitcoin. However, he added that it would not equate to a 1 million BTC purchase.
“It wouldn't be the size and scale of 1 million coins, but it would be a significant position.”
Dennis Porter, the co-founder of the non-profit act Satoshi Act Fund, which supports pro-Bitcoin US policy bills, also believes Trump is exploring the option of creating a reserve through an executive order.
“I can confirm that Trump is exploring an Executive Order creating a ‘Strategic Bitcoin Reserve.’ The Treasury, through the Exchange Stabilization Fund, has the authority to stabilize the dollar by buying currencies. Trump will use this fund to buy Bitcoin.”
Is Bitcoin Already In A Supercycle?
Alex Kruger, economist and founder of macro digital advisory firm Asgard Markets, believes the election results indicate Bitcoin is already in a supercycle. He compared Bitcoin’s current situation with gold, which jumped from $35 per ounce in 1971 to $850 in 1981 after President Richard Nixon took the US off the gold standard. Kruger did not rule out the possibility of another bear cycle but urged investors to compare this cycle with previous ones.
A Domino Effect
If passed, the act could kick off a race as other countries scramble to create their own Bitcoin strategic reserves. Analysts believe enacting the Bitcoin Reserve Act would be a turning point for global Bitcoin adoption and become one of the most bullish events in crypto history by catalyzing a race to acquire as much BTC as possible. Crypto investor and Bitcoin educator Chris Dunn said that a FOMO-based buying spree by some of the world’s biggest economies could completely alter the current crypto market cycle.
“If the US or another major economic power started accumulating, Bitcoin could trigger an FOMO, which could create a market cycle and supply-demand dynamics unlike anything we’ve seen so far.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
