Original title: A Bitcoin Reserve Act may end crypto's 4-year boom-bust cycle
Original author: DANIEL RAMIREZ-ESCUDERO, Cointelegraph
Original translation by: Lawrence, MarsBit
(The Bitcoin Reserve Act) could break the halving cycle. Will this four-year cycle unfold differently? Will we enter a legendary super cycle?
Increasing speculation suggests that incoming President Donald Trump may sign an executive order establishing a Bitcoin reserve on his first day in office or establish reserves through legislation during his term, with many wondering if such a move would lead to a cryptocurrency super cycle.
Since Wyoming Senator Cynthia Lummis introduced (the Bitcoin Reserve Act) earlier this year, states like Texas and Pennsylvania have also proposed similar measures. Reports indicate that Russia, Thailand, and Germany are also considering their proposals, adding further pressure.
If governments are racing to secure their Bitcoin reserves, will we bid farewell to what many believe is the four-year boom-bust cycle in cryptocurrency caused by Bitcoin halving?
Nexo analyst Iliya Kalchev believes that "(the Bitcoin Reserve Act) could be a milestone moment for Bitcoin, signifying its 'recognition as a legitimate global financial instrument.'"
"Every Bitcoin cycle has a narrative trying to push the idea that 'this time is different.' The conditions have never been so ideal. Cryptocurrency has never had a pro-crypto U.S. president controlling the Senate and Congress."
The Bitcoin bill proposed by Lummis in 2024 will allow the U.S. government to introduce Bitcoin as a reserve asset by purchasing 200,000 Bitcoins annually over five years, accumulating 1 million Bitcoins and holding them for at least 20 years.
Jack Mallers, founder and CEO of Strike, believes Trump "could potentially use an executive order to buy Bitcoin," but he cautioned that this does not equate to buying 1 million Bitcoins.
Dennis Porter, co-founder of the nonprofit Satoshi Act Fund supporting U.S. policy bills for Bitcoin, also believes Trump is exploring establishing a strategic Bitcoin reserve through an executive order.
Dennis Porter announced that Trump is exploring an executive order regarding a strategic Bitcoin reserve. Source: Dennis Porter
So far, Trump's team has not directly confirmed the claims about the executive order, but when Trump was asked on CNBC whether the U.S. would establish a BTC reserve similar to its oil reserve (which could imply legislation), he responded, "Yes, I think it will."
However, executive orders lack stability, as subsequent presidents often overturn such directives. The only way to ensure a strategic Bitcoin reserve's long-term future is through legislation that gains majority support.
Due to the Republican majority in Congress, with only a slim majority in the Senate, Bitcoin supporters in Trump's team have ample reason to push Lummis's bill. However, as long as a few Republican defectors are influenced by the anger of progressives, they may block the bill's passage, as they believe the bill hands government wealth to Bitcoin holders.
Results of the U.S. Senate and House elections after the 2024 elections. Source: AP
Do not compare this cycle with previous cycles anymore.
Earlier this month, Alex Krüger, founder of macro digital asset consulting firm Asgard Markets, stated that the election results made him believe that "Bitcoin is very likely to enter a super cycle."
He believes Bitcoin's unique situation can be compared to gold. After former U.S. President Richard Nixon announced the abandonment of the gold standard, ending the Bretton Woods system, Bitcoin's price skyrocketed from $35 an ounce in 1971 to $850 in 1981.
Krüger does not rule out the possibility of Bitcoin experiencing a bear market like in the past. However, he urges cryptocurrency investors "not to compare this cycle with previous ones," as this time may be different.
Trump's actions so far undoubtedly indicate that government policy will move in a favorable direction. After Gary stepped down, he nominated Paul Atkins, a pro-crypto and deregulation supporter, to chair the U.S. Securities and Exchange Commission.
He also nominated crypto supporter Scott Bessent for Treasury Secretary and appointed former PayPal COO David Sacks as the crypto and AI czar, responsible for creating a clear legal framework for the cryptocurrency industry.
The super cycle 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 around mainstream and institutional adoption.
During the 2013-2014 bull market, the super cycle theory was supported by the theory that Bitcoin would be recognized as an alternative asset for legal tender on the international stage.
During the 2017-2018 cycle, the rapid price increase was seen as a sign of mainstream financial adoption and a marker for Bitcoin beginning to gain mainstream acceptance, with institutional interest set to flourish.
In 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.
Bitcoin's price performance peaked and bottomed out in previous cycles. Source: Caleb & Brown
However, in every cycle, the narrative of the super cycle has not materialized, ultimately leading to price crashes and supporters going bankrupt, entering a long bear market. Su Zhu, co-founder of Three Arrows Capital, was one of the most prominent supporters of the super cycle theory in 2021, believing that even without a prolonged bear market, the cryptocurrency market would remain bullish, with Bitcoin eventually reaching a peak of $5 million.
3AC did borrow money, as if the super cycle theory were true, and when it was ultimately liquidated, the cryptocurrency market cap dropped nearly 50% due to the news, leading to the bankruptcy and financial distress of lenders including Voyager Digital, Genesis Trading, and BlockFi.
Thus, the super cycle is a dangerous theory and should not be gambled with your life savings.
For Chris Brunsike, partner at venture capital firm Placeholder and former head of blockchain products at ARK Invest, the Bitcoin super cycle is just a myth.
The super cycle is undoubtedly a collective illusion. Nevertheless, given the support of the U.S. president, the election results provide unprecedented and extremely bullish conditions for Bitcoin, and the U.S. president seems to be fulfilling his promise to support cryptocurrency, including never selling Bitcoin from the U.S. Bitcoin stockpile.
Potential global domino effect.
If (the Bitcoin Reserve Act) is passed, 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 shifted 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 Bitcoin adoption," and could "trigger other countries and private institutions to follow suit, driving broader adoption and enhancing market liquidity."
Basel Ismail, CEO of cryptocurrency investment analysis platform Blockcircle, agreed and stated that approval would be "one of the most exciting events in crypto history," as "it would catalyze a race to acquire as much Bitcoin as possible."
Other countries will have no voice and will be forced to act. They will either turn to, compete, or perish. He believes that "most countries in the G20, which are the most powerful and economically advanced in the world, will follow suit and establish their own reserves."
Veteran cryptocurrency investor and Bitcoin educator Chris Dunn told Cointelegraph that this FOMO-based race among countries could fundamentally change the current cryptocurrency market cycle.
If the U.S. or other major economic powers start accumulating, Bitcoin could trigger FOMO, leading to a market cycle and supply-demand dynamics we have never seen before.
OKX Exchange President Hong Fang told Cointelegraph that other countries may already be prepared for such a competition.
Game theory has likely been quietly at work.
However, Ismail stated that most Bitcoin purchases will be conducted through over-the-counter brokers and settled in large trades, so "it may not have a direct impact on Bitcoin's price," but will create a lasting demand force that ultimately pushes Bitcoin's price higher.
A new wave of cryptocurrency investors could change the dynamics of the cryptocurrency market.
If nations become market buyers, the Bitcoin market could undergo a fundamental change. 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 stated that while this legislation may disrupt Bitcoin's well-known four-year halving cycle is still speculative, several dynamic changes could emerge.
Bitcoin is a unique market driven so far by retail buying and selling, with prices reacting strongly to market psychology. The emergence of new types of investors could change market dynamics and alter historical cycles.
Ismail believes that "the behavior of stock market investors will differ from" the overreacting retail investors. Institutional investors have deep pockets and advanced risk management strategies, allowing them to treat Bitcoin differently from retail investors.
Over time, Wall Street's involvement will help create a more stable, less reactive market environment. Stability is another way of saying reduced volatility, which logically means that bear markets will not be as severe as in past cycles.
Georgiades believes that "the price cycle will continue," but "the ongoing demand from large buyers like the U.S. can reduce the volatility and fluctuations we saw in previous cycles."
Meanwhile, Ismail pointed out that the performance of the Bitcoin market has already differed from previous four-year cycles. Bitcoin's price has broken below the previous cycle's all-time high (ATH) in the current cycle, "everyone thought this was impossible," and then set a new all-time high before the official halving.
The four-year cycle has been debunked and broken multiple times.
So far, Bitcoin has only gone through four halvings, with nearly thirty more halving events yet to occur. "It is hard to imagine that all these halvings will follow the same predictable four-year pattern," Kalchev said, especially as broader macroeconomic and political factors (such as central bank policies and regulatory developments) have a greater impact on Bitcoin's market movements.
Kalchev believes that Bitcoin's price movements will no longer be so influenced by internal mechanisms like halving, but will be more affected by external factors such as institutional adoption and geopolitical events.
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