Original author: DANIEL RAMIREZ-ESCUDERO
Translation: Lawrence, Mars Finance
(The Bitcoin Reserve Act) might break the halving cycle. Will this four-year cycle unfold differently? Will we enter a mythical supercycle?
Increasing speculation suggests that incoming President Donald Trump may sign an executive order on his first day in office to announce the establishment of Bitcoin reserves, or establish reserves through legislation during his term, leaving many wondering if this move will lead to a cryptocurrency supercycle.
Since Wyoming Senator Cynthia Lummis proposed (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, further increasing the pressure.
If governments are racing to secure their Bitcoin reserves, are we bidding farewell to what many believe is the four-year boom and bust cycle of cryptocurrency prices caused by Bitcoin halving?
Iliya Kalchev, an analyst at 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 instrument.'
"Each Bitcoin cycle comes with a narrative attempting to push the idea of 'this time is different.' Conditions have never been so ideal. The cryptocurrency sector has never had a pro-cryptocurrency U.S. president controlling the Senate and Congress."
The Bitcoin bill proposed by Lummis would allow the U.S. government to acquire Bitcoin 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 warns that this does not equate to purchasing 1 million Bitcoins.
Dennis Porter, co-founder of the nonprofit Satoshi Act Fund that supports U.S. policy bills for Bitcoin, also believes that Trump is exploring establishing strategic Bitcoin reserves through an executive order.
Dennis Porter announced that Trump is exploring an executive order on strategic Bitcoin reserves. Source: Dennis Porter
So far, Trump's team has not directly confirmed the claims regarding the executive order, but when asked on CNBC whether the U.S. would establish a BTC reserve similar to its oil reserves (which might 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.
Due to Republican dominance in Congress, with only a slim majority in the Senate, Bitcoin supporters in Trump's team have ample reason 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, as they believe it hands government wealth over 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 and economist, stated that the election results led him to believe that 'Bitcoin is very likely to enter a supercycle.'
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, Bitcoin's price skyrocketed 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 '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's departure, he nominated Paul Atkins, a supporter of cryptocurrency and deregulation, as chairman 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 crypto czar, responsible for creating a clear legal framework for the cryptocurrency industry.
The supercycle theory has never achieved super results.
However, the concept of 'this cycle is different' has appeared in every Bitcoin bull market, each time supported by narratives surrounding mainstream and institutional adoption.
During the 2013-2014 bull market, the supercycle theory was supported by the idea that Bitcoin would attract international attention as an alternative asset to fiat currency.
During the 2017-2018 cycle, the rapid price increase 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 booming.
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 manifests peaks and troughs in previous cycles. Source: Caleb & Brown
However, in each cycle, the narrative of the supercycle 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 notable proponents of the supercycle theory in 2021, believing that even without a sustained 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 dropped nearly 50% due to the news, leading to bankruptcies and financial troubles for lenders including Voyager Digital, Genesis Trading, and BlockFi.
Therefore, the supercycle 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 supercycle is just a myth.
The supercycle is undoubtedly a collective illusion.
Nonetheless, considering the support of the U.S. president, the election results provide Bitcoin with unprecedented, extremely bullish conditions, while the U.S. president seems to be fulfilling his promise to support cryptocurrency, including never selling the Bitcoin in the U.S. Bitcoin inventory.
Potential global domino effect.
If (the Bitcoin Reserve Act) is passed, it could trigger a global competition to hold Bitcoin, with other countries likely to follow suit to avoid falling behind.
George S. Georgiades, a lawyer who transitioned from providing financing advice to Wall Street firms to serving the cryptocurrency industry in 2016, told Cointelegraph that the enactment of (the Bitcoin Reserve Act) 'would mark a turning point for global Bitcoin adoption' and could 'trigger other countries and private entities to follow suit, driving broader adoption and enhancing market liquidity.'
Basel Ismail, CEO of cryptocurrency investment analysis platform Blockcircle, agreed, 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 and will be forced to act. They will either pivot, compete, or perish.
He believes that 'most of the countries in the G20, which are the world's most powerful and economically advanced nations, will follow suit and establish their own reserves.'
Senior cryptocurrency investor and Bitcoin educator Chris Dunn told Cointelegraph that this FOMO-driven race between countries could fundamentally alter the current cryptocurrency market cycle.
If the U.S. or other major economic powers begin to accumulate, Bitcoin may 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 a competition.
Game theory has likely already quietly come into play.
However, Ismail stated that most Bitcoin purchases will be made through over-the-counter brokers and settled in bulk trades, so 'it may not have a direct impact on the price of Bitcoin,' but it will create a lasting demand force that ultimately pushes the price of Bitcoin up.
A new wave of cryptocurrency investors may change the dynamics of the cryptocurrency market.
If nations become market buyers, the Bitcoin market may undergo fundamental changes. 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, 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 may change market dynamics and alter 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, participation from Wall Street will help create a more stable and less reactive market environment.
Stability is another term for reduced volatility, which logically means that bear markets will not be as severe as in previous cycles.
George DeS has stated that 'the price cycle will continue,' but 'the sustained demand from large buyers like the U.S. can reduce volatility and the fluctuations we saw in past cycles.'
Meanwhile, Ismail pointed out that the performance of the Bitcoin market has already differed from previous four-year cycles. Bitcoin's price has fallen below the historical peak (ATH) of the previous cycle in the current cycle, 'which everyone thought was impossible,' then set a new historical high before the official halving.
The four-year cycle has been repeatedly debunked and broken.
So far, Bitcoin has only experienced four halvings, with nearly thirty more halvings 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 policy and regulatory developments) have a greater impact on Bitcoin's market movements.
Kalchev believes that Bitcoin's price movements will no longer be as influenced by internal mechanisms like halving, but more by external factors like institutional adoption and geopolitical events.
