Original author: DANIEL RAMIREZ-ESCUDERO
Translation: Lawrence, Mars Finance
(The Bitcoin Reserve Bill) could break the halving cycle. Will this four-year cycle unfold differently? Will we enter a mythical supercycle?
There is increasing speculation that incoming President Donald Trump may sign an executive order establishing Bitcoin reserves on his first day in office or will establish reserves through legislation during his term, leading many to wonder if this move will trigger a cryptocurrency supercycle.
Since Senator Cynthia Lummis of Wyoming proposed (the Bitcoin Reserve Bill) earlier this year, states like Texas and Pennsylvania have also introduced similar proposals. Reports indicate that Russia, Thailand, and Germany are also considering their proposals, adding further pressure.
If governments are competing to secure their Bitcoin reserves, will we say goodbye to what many believe is the four-year boom and bust cycle of cryptocurrency prices caused by Bitcoin halving?
Nexo analyst Iliya Kalchev believes that '(the Bitcoin Reserve Bill) could be a milestone moment for Bitcoin, indicating its 'recognition as a legitimate global financial instrument.'
'With every Bitcoin cycle, there is a narrative trying to push the idea that 'this time is different.' The conditions have never been so ideal. The cryptocurrency space has never had a pro-cryptocurrency U.S. president controlling the Senate and Congress.'
The Bitcoin bill proposed by Lummis for 2024 would allow the U.S. government to introduce Bitcoin by purchasing 200,000 Bitcoins annually over five years, accumulating one 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 purchase Bitcoin,' but he warns that this does not equate to buying one million Bitcoins.
Dennis Porter, co-founder of the nonprofit Satoshi Act Fund that supports U.S. policy bills for Bitcoin, also believes Trump is exploring establishing strategic Bitcoin reserves through executive orders.
Dennis Porter announced that Trump is exploring an executive order regarding strategic Bitcoin reserves. Source: Dennis Porter
So far, Trump's team has not directly confirmed the claims about the executive order, but when asked on CNBC whether the U.S. would establish a BTC reserve similar to its oil reserves (which could imply legislation), he responded, 'Yes, I think so.'
However, executive orders lack stability, as subsequent presidents often overturn such orders. The only way to ensure the long-term future of strategic Bitcoin reserves is through legislation that gains majority support.
Due to the Republican dominance in Congress, with only a slight majority in the Senate, Bitcoin supporters in Trump's team have plenty of reasons to push for Lummis's bill. However, as long as a few Republican defectors are influenced by the outrage of progressives, they may block the bill's passage, as they believe it hands government wealth to Bitcoin holders.
Results from the 2024 U.S. Senate and House elections. Source: AP
Do not compare this cycle with previous ones anymore.
Earlier this month, macro digital asset consulting firm Asgard Markets founder and economist Alex Krüger stated that the election results led him to believe 'Bitcoin is likely entering a supercycle.'
He believes Bitcoin's unique situation can be compared to gold. Following former President Richard Nixon's announcement that the U.S. would abandon the gold standard, ending the Bretton Woods system, Bitcoin's price soared from $35 per ounce in 1971 to $850 in 1981.
Krüger does not rule out the possibility that Bitcoin could experience bear markets like in the past. However, he urged cryptocurrency investors 'not to compare this cycle with previous ones,' as it may be different this time.
Trump's actions so far undoubtedly indicate that government policy will move in a favorable direction. After Gary's departure, he nominated Paul Atkins, a supporter of cryptocurrency and deregulation, to chair the U.S. Securities and Exchange Commission.
He also nominated cryptocurrency supporter Scott Bessent as Treasury Secretary and appointed former PayPal COO David Sacks as the czar of AI and cryptocurrency, responsible for developing a clear legal framework for the cryptocurrency industry.
The supercycle theory has never achieved super results.
However, the concept that 'this cycle is different' has appeared in every previous Bitcoin bull market, each time with narratives surrounding mainstream and institutional adoption as support.
During the 2013-2014 bull market, the supercycle theory was supported by the notion that Bitcoin would attract international attention as an alternative asset to being legal tender.
During the 2017-2018 cycle, the rapid price rise was seen as a sign of mainstream financial adoption and a sign that Bitcoin was beginning to be accepted by the mainstream, with institutional interest set to thrive.
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.
Bitcoin's price has reached peaks and troughs in previous cycles. Source: Caleb & Brown
However, in every cycle, the narrative of the supercycle has not materialized, ultimately leading to price crashes, the collapse of supporters, and a long bear market. Su Zhu, co-founder of Three Arrows Capital, was the most notable supporter of the 2021 supercycle theory, 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 supercycle theory were true, and when it was eventually liquidated, the cryptocurrency market cap fell nearly 50% due to the news, leading to the bankruptcy and financial struggles of lenders including Voyager Digital, Genesis Trading, and BlockFi.
Thus, the supercycle 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 supercycle is just a myth.
The supercycle is undoubtedly a collective illusion.
Nevertheless, considering the support of the U.S. president, the election results provided Bitcoin with unprecedented and extremely bullish conditions, as the U.S. president seems to be fulfilling his commitment to support cryptocurrency, including never selling Bitcoin from the U.S. Bitcoin inventory.
Potential global domino effect.
If (the Bitcoin Reserve Bill) is passed, it could trigger a global race to hold Bitcoin, with other countries following suit to avoid falling behind.
George S. Georgiades, a lawyer who shifted from providing financing advice to Wall Street firms to serving the cryptocurrency industry in 2016, told Cointelegraph that enacting (the Bitcoin Reserve Bill) 'would mark a turning point in 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, agrees and states 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 say and will be forced to take action. Either they turn, compete, or perish.
He believes that 'most countries in the G20, the most powerful and economically advanced countries in the world, will follow suit and establish their reserves.'
Veteran cryptocurrency investor and Bitcoin educator Chris Dunn told Cointelegraph that this FOMO-based buying frenzy among countries could fundamentally alter the current cryptocurrency market cycle.
If the U.S. or other major economic powers start accumulating, Bitcoin could trigger FOMO, potentially creating a market cycle and supply-demand dynamics that we have never seen before.
OKX exchange president Hong Fang told Cointelegraph that other countries may already be prepared for such competition.
Game theory has likely already quietly come into play.
However, Ismail indicated that most Bitcoin purchases will be conducted through over-the-counter brokers and settled in bulk, so 'it may not have a direct impact on Bitcoin's price,' but will create a lasting demand force that will eventually push up Bitcoin's price.
A new wave of cryptocurrency investors may change the dynamics of the cryptocurrency market.
If nations become market buyers, the Bitcoin market could fundamentally 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 might disrupt the well-known four-year Bitcoin halving cycle, several dynamic changes could emerge.
Bitcoin is a unique market, driven by retail buying and selling so far, with prices reacting strongly to market psychology. The emergence of new types of investors could change market dynamics and historical cycles.
Ismail believes that 'investor behavior in the stock market will differ from' the overreacting retail investors. Institutional investors have substantial capital and advanced risk management strategies, allowing them to treat Bitcoin differently than retail investors.
Over time, Wall Street's involvement will help create a more stable and less reactive market environment.
Stability is another term for reduced volatility, which logically means that bear markets may not be as severe as in past cycles.
George DeS states that 'the price cycle will continue,' but 'ongoing demand from large buyers like the U.S. can reduce the volatility and fluctuations we have seen in past cycles.'
Meanwhile, Ismail pointed out that the Bitcoin market's performance has already differed from previous four-year cycles. Bitcoin's price has fallen below the historical peak (ATH) of the last cycle during the current cycle, 'which everyone thought was impossible,' and then set a new historical high before the formal halving.
The four-year cycle has been debunked and broken multiple times.
So far, Bitcoin has only experienced four halvings, with nearly thirty more halvings yet to occur. 'It's hard to imagine all these halvings following 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 Bitcoin's price movements will no longer be as influenced by internal mechanisms like halving, but more by external factors such as institutional adoption and geopolitical events.
