With increasing speculation that newly elected President Donald Trump may sign an executive order declaring a Bitcoin Reserve on his first day or pass legislation to establish a reserve fund during his term, many are wondering if this move could lead to a cryptocurrency supercycle.
Since Wyoming Senator Cynthia Lummis introduced the Bitcoin Reserve Act earlier this year, states like Texas and Pennsylvania have submitted similar proposals. Russia, Thailand, and Germany are reportedly considering their own proposals, further increasing pressure.
If governments are competing to secure their own Bitcoin reserves, could we bid farewell to the four-year boom-bust cycle of cryptocurrency prices that many attribute to Bitcoin halving?
Iliya Kalchev, an analyst at cryptocurrency lending firm Nexo, believes that "the Bitcoin Reserve Act could be a significant moment for Bitcoin, signaling its recognition as a legitimate global financial instrument."
"Every Bitcoin cycle has a story trying to push the idea that 'this cycle is different'. Conditions have never been so ideal. Crypto has never had a U.S. President supporting cryptocurrency controlling the Senate and Congress."
The Bitcoin Act of 2024 proposed by Lummis will allow the U.S. government to incorporate Bitcoin into its treasury as a reserve asset by purchasing 200,000 BTC annually over five years, accumulating 1 million Bitcoins, which it can hold for at least 20 years.
Jack Mallers, the founder and CEO of Strike, believes that Trump has "the ability to use an executive order on day one to buy Bitcoin," although he warns that this would not equate to buying 1 million Bitcoins.
Dennis Porter, co-founder of the nonprofit Satoshi Act Fund, which advocates for U.S. Bitcoin-supportive policy bills, also believes that Trump is looking to allow a strategic Bitcoin reserve fund through an executive order.
So far, Trump's team has not directly confirmed the statements about the executive order, but Trump was asked on CNBC whether the U.S. would create a BTC reserve fund similar to its oil reserves (which could imply legislation), and he responded, "Yes, I think so."
However, an executive order would lack stability since subsequent presidents often reverse such orders. The only way to ensure the long-term future of a strategic Bitcoin reserve fund is through legislation with majority support.
Bitcoin supporters within Trump's team have a solid foundation to push Lummis's bill as Republicans dominate Congress and hold a slim majority in the Senate. However, a handful of Republican defectors, influenced by progressive outrage over supposedly handing government assets to Bitcoin supporters, could derail the bill.
'Don't compare this cycle to previous cycles'
Earlier this month, Alex Krüger, an economist and founder of macro digital asset consulting firm Asgard Markets, stated the election results led him to believe that "Bitcoin is very likely to enter a supercycle."
He believes the unique situation of Bitcoin can be compared to gold, as its price rose from $35 an ounce in 1971 to $850 in 1981 when former U.S. President Richard Nixon took the U.S. off the gold standard, ending the Bretton Woods system.
Krüger does not rule out the possibility that Bitcoin will experience bear markets like previous cycles. However, he urges cryptocurrency investors to "stop comparing this cycle to previous cycles" as this time could be different.
Trump's actions so far certainly indicate a favorable administration is forthcoming. He has nominated Paul Atkins, a cryptocurrency supporter and deregulator, to chair the Securities and Exchange Commission after Gary Gensler's resignation.
He also nominated cryptocurrency supporter Scott Bessent as Secretary of the Treasury and appointed former PayPal CEO David Sacks as an AI and cryptocurrency expert, tasked with developing a clear legal framework for the cryptocurrency industry.
The supercycle theory has never yielded extraordinary results.
However, the concept of 'this cycle is different' has emerged in every previous Bitcoin bull run, each time supported by stories surrounding widespread and institutional adoption.
During the 2013-2014 bull run, the supercycle theory was supported by the idea that Bitcoin would attract international interest as an alternative asset to fiat currency.
In the 2017-2018 cycle, the rapid price surge was seen as a sign of mainstream financial acceptance and the beginning of mainstream adoption of Bitcoin, where institutional interest would thrive.
During the 2020-2021 cycle, when tech companies like MicroStrategy, Square, and Tesla entered the Bitcoin market, they believed many tech-related firms would follow suit.
However, in every cycle, the supercycle narrative has not materialized and ends with a price crash that wipes out its advocates as it enters a prolonged bear market.
Su Zhu, co-founder of Three Arrows Capital, is the most notable proponent of the Supercycle Thesis since 2021, arguing that the cryptocurrency market will remain in a bull market without prolonged bear markets, with Bitcoin eventually peaking at $5 million.
3AC certainly borrowed money as if the supercycle theory were real, and when it was finally liquidated, the cryptocurrency market capitalization dropped nearly 50% when news broke, leading to bankruptcies and financial troubles for lenders including Voyager Digital, Genesis Trading, and BlockFi.
Therefore, the supercycle is a dangerous theory to bet your life savings on.
For Chris Burniske, a partner at venture capital firm Placeholder and former blockchain product director at ARK Invest, the Bitcoin supercycle is a myth.
"The supercycle is certainly a collective illusion."
However, the U.S. election results have given Bitcoin unprecedented and extremely optimistic conditions considering the backing of a U.S. President who seems to be fulfilling his cryptocurrency support promises, including the promise never to sell Bitcoin from the U.S. Bitcoin reserve.
Potential global domino effect.
If the Bitcoin Reserve Act is passed, it could trigger a global holding race as other countries follow suit to avoid falling behind.
George S. Georgiades, a lawyer who transitioned from advising Wall Street firms on fundraising to working with the cryptocurrency industry in 2016, told Cointelegraph that the passage of the Bitcoin Reserve Act "would mark a turning point for global Bitcoin adoption" and could potentially "encourage other countries and private organizations to follow suit, promoting wider adoption and enhancing market liquidity."
Basel Ismail, CEO of cryptocurrency investment analytics platform Blockcircle, agrees and states that approval would be "one of the most bullish events in cryptocurrency history" because "it will drive the race to accumulate as much Bitcoin as possible."
"Other countries will not have a voice; they will be forced to act. Pivot and compete, or die."
He believes that "most G20 nations, the most powerful and advanced economies in the world, will follow suit and create their own reserves."
Veteran cryptocurrency investor and Bitcoin educator Chris Dunn shared with Cointelegraph that a competitive buying spree driven by FOMO among nations could completely change the current cryptocurrency market cycle.
"If the U.S. or another major economic power begins accumulating, Bitcoin could trigger FOMO, thereby creating a market cycle and supply-demand dynamics unlike anything we have seen so far."
Hong Fang, President of the OKX exchange, told Cointelegraph that other countries may already be prepared for such a race.
"Game theory has probably been quietly applied."
However, Ismail stated that most Bitcoin purchases will be made through over-the-counter trading brokers and processed in blocks, which means "there may not be a direct, immediate impact on BTC prices," but rather will create long-term demand that will eventually push Bitcoin prices higher.
A wave of new cryptocurrency investors could change the dynamics of the cryptocurrency market.
The Bitcoin market could change significantly if countries become market buyers. A wave of new investors from global financial centers could flood the cryptocurrency market, changing market dynamics, sentiment, and reactions to certain events.
Nexo analyst Kalchev stated that while it remains speculative to suggest that this law could disrupt Bitcoin's four-year halving cycle, some dynamics may change.
Bitcoin is a unique market, driven by retail buying and selling activity with prices reacting very strongly to market sentiment. The emergence of new types of investors could change market dynamics, altering historical cycles.
Ismail believes that "investors from the stock market will behave differently" compared to retail investors who react excessively. Institutional investors bring significant capital and advanced risk management strategies, allowing them to approach Bitcoin differently than retail investors.
"Over time, Wall Street's involvement could contribute to creating a more stable market environment with less reaction."
Stability is another way of saying less volatility, which logically means that bear markets will be less aggressive compared to previous cycles.
Georgiades believes that "the price cycle will continue," but "sustainable demand from large-scale buyers like the U.S. could reduce the volatility and fluctuations we have witnessed in previous cycles."
Meanwhile, Ismail points out that the Bitcoin market has behaved differently compared to previous four-year cycles. Bitcoin's price in the current cycle has dropped below the all-time high (ATH) of the previous cycle, "which everyone believed was impossible," and then Bitcoin reached a new ATH before the Halving officially took place.
"The four-year cycle has been exposed and broken many times already."
Bitcoin has only gone through four halvings so far, with nearly thirty halving events yet to occur. Kalchev stated, "It is hard to imagine that all of these halvings will follow the same predictable four-year model," especially as broader macroeconomic and political factors—such as central bank policies and legal developments—have a significantly greater impact on Bitcoin's market trajectory.
Kalchev believes that Bitcoin's price volatility will be less dependent on internal mechanisms like Halving and more influenced by external factors such as institutional acceptance and geopolitical events.
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