The 'Bitcoin Reserve Act' may disrupt the halving cycle. Will this four-year cycle unfold differently? Will we enter a mythical super-cycle?
Increasing speculation suggests that the incoming President Donald Trump may sign an executive order to establish a Bitcoin reserve on his first day in office, or pass legislation to establish a reserve during his term, and many wonder if this move will lead to a cryptocurrency super-cycle.
Since Wyoming Senator Cynthia Lummis proposed the 'Bitcoin Reserve Act' earlier this year, states like Texas and Pennsylvania have also put forward similar proposals. Reports indicate that Russia, Thailand, and Germany are also considering their own proposals, further increasing the pressure.
If governments around the world are competing to secure their own Bitcoin reserves, will we bid farewell to the four-year cycle of cryptocurrency price rises and falls that many believe is caused by Bitcoin halvings?
Iliya Kalchev, an analyst at the cryptocurrency lending platform Nexo, believes that the 'Bitcoin Reserve Act' could be a "milestone moment for Bit, signaling its 'recognition as a legitimate global financial instrument'."
"Every Bit cycle has this 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 US President controlling the Senate and Congress."
Lummis' 2024 Bit Act will allow the US government to introduce Bit by purchasing 200,000 Bit per year over five years to build a 1 million Bit reserve asset held in its vaults, to be held for at least 20 years.
Strike founder and CEO Jack Mallers believes Trump "could potentially use an executive order to purchase Bit", but warns that this does not equate to purchasing 1 million Bit.
Dennis Porter, co-founder of the non-profit Satoshi Act Fund supporting pro-Bit US policy legislation, also believes Trump is exploring establishing a strategic Bit reserve through executive order.
So far, Trump's team has not directly confirmed the claims about an executive order, but when asked on CNBC whether the US would establish a BTC reserve similar to its oil reserve (which could imply legislation), Trump replied: "I think so, yes."
However, executive orders lack stability, as subsequent presidents often overturn such orders. The only way to ensure a strategic Bit reserve has a long-term future is through legislation with broad support.
With the Republicans dominant in Congress and holding a slim majority in the Senate, Bit supporters in Trump's team have ample reason to push for the Lummis Act. However, as long as there are a few Republican defectors swayed by the anger of progressives, they may block the bill's passage, as they see it as handing wealth to Bit holders.
Do not compare this cycle to previous cycles
Earlier this month, Asgard Markets founder and economist Alex Krüger said the election results make him believe "Bit is likely to enter a super-cycle".
He believes Bit's unique situation can be compared to gold. After former President Richard Nixon announced the US abandoning the gold standard and the end of the Bretton Woods system, Bit's price skyrocketed from $35 per ounce in 1971 to $850 in 1981.
Krüger does not rule out the possibility of Bit experiencing bear markets like in the past. However, he urges cryptocurrency investors "not to compare this cycle to previous cycles", as this one may be different.
Trump's actions so far clearly indicate that government policy will move in a favorable direction. After Gary's departure, he nominated pro-crypto and deregulation advocate Paul Atkins to chair the US Securities and Exchange Commission.
He also nominated crypto supporter Scott Bessent as Treasury Secretary and appointed former PayPal COO David Sacks as the AI and Crypto Czar to develop a clear legal framework for the crypto industry.
The super-cycle theory has never achieved super results
However, the "this cycle is different" concept has appeared in every previous Bit bull market, each time with narratives around mainstream and institutional adoption as support.
During the 2013-2014 bull market, the super-cycle theory was supported by the theory that Bit would become an alternative asset to fiat currencies gaining international attention.
In the 2017-2018 cycle, the rapid price increase was seen as a sign of mainstream finance adoption and Bit's acceptance into the mainstream, with the belief that institutional interest would flourish.
In the 2020-2021 cycle, when tech companies like MicroStrategy, Square, and Tesla entered the Bit market, they believed many tech-related companies would follow suit.
However, in each cycle, the super-cycle narrative has not materialized, ultimately leading to price crashes and the collapse of supporters, entering prolonged bear markets. Three Arrows Capital co-founder Su Zhu was one of the most prominent supporters of the 2021 super-cycle theory, believing the crypto market would remain bullish even without a sustained bear market, with Bit ultimately reaching a $5 million peak.
3AC did indeed borrow money as if the super-cycle theory was real, and when it was finally liquidated, the crypto market cap plummeted nearly 50% on the news, causing the collapse and financial distress of lenders including Voyager Digital, Genesis Trading, and BlockFi.
Therefore, the super-cycle is a dangerous theory that you should not bet your life savings on.
For Chris Brunsike, partner at venture capital firm Placeholder and former blockchain product lead at ARK Invest, the Bit super-cycle is just a myth.
The super-cycle is undoubtedly a collective delusion. Nevertheless, considering the support of the US President, the US election results have provided Bit with unprecedented and highly bullish conditions, and the US President appears to be fulfilling his commitment to support cryptocurrencies, including never selling the Bit in the US's Bit reserves.
Potential global domino effect
If the 'Bitcoin Reserve Act' is passed, it could trigger a global race to hold Bit, with other countries also following suit to avoid falling behind.
George S. Georgiades, a lawyer who shifted from advising Wall Street firms on financing to serving the cryptocurrency industry in 2016, told Cointelegraph that the enactment of the 'Bitcoin Reserve Act' "will mark a turning point in global Bit adoption" and could "trigger imitation by other countries and private institutions, 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" because "it will catalyze a race to acquire as much Bit as possible."
Other countries will have no say, they will be forced to take action. Either turn around, compete, or perish. He believes that "most of the countries in the G20, which are the world's most powerful and economically advanced countries, will emulate and establish their own reserves."
Veteran cryptocurrency investor and Bitcoin educator Chris Dunn told Cointelegraph that this FOMO-driven buying frenzy among countries could fundamentally change the current cryptocurrency market cycle.
If the United States or other major economic powers start accumulating, Bitcoin could trigger FOMO, which could create a market cycle and supply-demand dynamic that we have never seen before.
OKX exchange president Hong Fang told Cointelegraph that other countries may have already prepared for such a race.
Game theory has likely already come into play.
However, Ismail said that most Bitcoin purchases will be made through over-the-counter brokers and settled in block trades, so "it may not have a direct impact on the price of Bitcoin," but will create a persistent demand force that will ultimately drive up the price of Bitcoin.
A new wave of cryptocurrency investors could 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 the cryptocurrency market, changing market dynamics, psychology, and reactions to certain events.
Nexo analyst Kalchev said that while this legislation may disrupt Bitcoin's well-known four-year halving cycle is still speculation, there may be several dynamic changes.
Bitcoin is a unique market, driven by retail buying and selling so far, with prices highly responsive to market psychology. The emergence of a new type of investor may change market dynamics and alter historical cycles.
Ismail believes that "the behavior of stock market investors will be different from" the over-reactive retail investors. Institutional investors have deep pockets and sophisticated 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 way of saying lower volatility, and logically, this means that bear markets will not be as severe as in past cycles.
Georgiadis believes that "price cycles will continue," but "sustained demand from large-scale buyers like the US can reduce volatility and the swings we've seen in past cycles."
At the same time, Ismail pointed out that Bitcoin's performance has already deviated from the previous four-year cycle. 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 set a new ATH before the official halving.
The four-year cycle has been repeatedly exposed 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 of 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 trajectory.
Kalchev believes that Bitcoin's price performance will be less influenced by internal mechanisms like halvings and more influenced by external factors like institutional adoption and geopolitical events.
Welcome to join the official BlockBeats community:
Telegram subscription group: https://t.me/theblockbeats
Telegram discussion group: https://t.me/BlockBeats_App
Twitter official account: https://twitter.com/BlockBeatsAsia
