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.
(Bitcoin Reserve Act) may break the halving cycle. Will this four-year cycle unfold differently? Will we enter a mythical super cycle?
There is increasing speculation that 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 it through legislation during his term, with many wondering whether this move will lead to a cryptocurrency super cycle.
Since Wyoming Senator Cynthia Lummis proposed the (Bitcoin Reserve Act) earlier this year, similar proposals have also emerged from states like Texas and Pennsylvania. Reports indicate that Russia, Thailand, and Germany are also considering their proposals, further increasing pressure.
If governments around the world are racing to secure their Bitcoin reserves, will we say goodbye to what many consider the four-year boom-bust cycle of cryptocurrency caused by Bitcoin halving?
Iliya Kalchev, an analyst at the cryptocurrency lending institution Nexo, believes that "(the Bitcoin Reserve Act) could be a milestone moment for Bitcoin, indicating its 'recognition as a legitimate global financial tool.'"
"Every Bitcoin cycle has this narrative attempting 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 would allow the U.S. government to introduce Bitcoin as a reserve asset 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 that 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 advocating for pro-Bitcoin U.S. policy bills, believes that Trump is exploring the establishment of a strategic Bitcoin reserve through executive order.
Dennis Porter announced that Trump is studying an executive order regarding strategic Bitcoin reserves. Source: Dennis Porter.
So far, Trump's team has not directly confirmed the reports of 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 replied, "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.
With the Republican Party dominating Congress and holding a slim majority in the Senate, Bitcoin supporters in Trump's team have ample reason to push for Lummis' bill. However, as long as there are a few Republican defectors influenced by the anger of progressives, they may block the bill's passage, believing it 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 the macro digital asset consulting firm Asgard Markets and an economist, stated that the election results made him believe that "Bitcoin is very likely to enter a super cycle."
He believes that 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, the price of Bitcoin surged from $35 per 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 to "not compare this cycle with previous cycles," as this time may be different.
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, as the chair of 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 cryptocurrency and AI czar, responsible for developing a clear legal framework for the cryptocurrency industry.
The super cycle theory has never achieved super results.
However, the concept that "this cycle is different" has appeared in every Bitcoin bull market in the past, each time with narratives surrounding mainstream and institutional adoption as support.
During the 2013-2014 bull market, the super cycle theory was supported by the theory that Bitcoin would attract international attention as an alternative asset for legal tender.
During the 2017-2018 cycle, the rapid price increase was seen as a sign of mainstream financial adoption and a marker of Bitcoin's beginning to gain mainstream acceptance, with institutional interest expected to flourish.
During the 2020-2021 cycle, when technology companies like MicroStrategy, Square, and Tesla entered the Bitcoin market, they believed that many tech-related companies would follow suit.
Bitcoin's price performance peaks and troughs in previous cycles. Source: Caleb & Brown.
However, in each cycle, the narrative of the super cycle has never materialized, ultimately leading to price crashes, supporters going bankrupt, and entering a long bear market. Su Zhu, co-founder of Three Arrows Capital, was one of the most notable supporters of the super cycle theory in 2021, believing that even without a prolonged bear market, the cryptocurrency market would remain bullish, and Bitcoin would eventually peak at $5 million.
3AC did borrow money, as if the super cycle theory were true, and when it was finally liquidated, the cryptocurrency market cap dropped nearly 50% due to the news, with the crash leading to the bankruptcy and financial distress of lenders including Voyager Digital, Genesis Trading, and BlockFi.
Therefore, the super cycle is a dangerous theory and should not be gambled with your life savings.
For Chris Brunsike, a partner at venture capital firm Placeholder and former head of blockchain products at ARK Invest, the Bitcoin super cycle is merely a myth.
The super cycle is undoubtedly a collective illusion. Nevertheless, given the support from the U.S. president, the election results provide Bitcoin with unprecedented and extremely bullish conditions, as the U.S. president seems to be fulfilling his promise to support cryptocurrency, which includes never selling the Bitcoin from the U.S. Bitcoin inventory.
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 the enactment of the (Bitcoin Reserve Act) "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 the crypto investment analysis platform Blockcircle, agrees, stating that approval would be "one of the most exciting events in crypto history," as "it will catalyze a race to acquire as much Bitcoin as possible."
Other countries will have no say; they will be forced to act. Either pivot, 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 the FOMO-driven buying frenzy among countries could fundamentally change the current cryptocurrency market cycle.
If the U.S. or other major economic powers begin to accumulate, 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 preparing for such a competition.
Game theory has likely already quietly come into play.
However, Ismail stated that most Bitcoin purchases will be conducted through over-the-counter brokers and settled in bulk transactions, so "it may not have a direct impact on Bitcoin's price," but would 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 countries 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 states that while this legislation may disrupt the well-known Bitcoin four-year halving cycle, several dynamic changes may occur.
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 ample funds and advanced risk management strategies that allow them to treat Bitcoin differently than retail investors.
Over time, Wall Street's participation will help create a more stable and less reactive market environment. Stability is another term for reduced volatility, which logically means that bear markets won't be as severe as in past cycles.
George S. Georgiades believes that "the price cycle will continue," but "the ongoing demand from large buyers like the U.S. could reduce volatility and the fluctuations we've seen in past cycles."
Meanwhile, Ismail pointed out that Bitcoin's market performance has already differed from previous four-year cycles. Bitcoin's price has fallen below the previous cycle's all-time high (ATH) in the current cycle, "which everyone thought was impossible," and then before the formal halving, Bitcoin set a new all-time high.
The four-year cycle has been repeatedly debunked and broken.
So far, Bitcoin has only experienced four halvings, with nearly thirty more halving events yet to occur. "It's 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 influence on Bitcoin's market trends.
Kalchev believes that 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.
