If the Bitcoin Reserve Bill is passed, it may end the four-year boom and bust cycle of cryptocurrencies

Original title: A Bitcoin Reserve Act may end crypto 's 4-year boom-bust cycle

Original author: DANIEL RAMIREZ-ESCUDERO, Cointelegraph

Original compilation: Lawrence, MarsBit

The Bitcoin Reserve Act could break the halving cycle. Will this four-year cycle unfold differently? Are we entering a mythical super cycle?

Speculation is growing that incoming President Donald Trump may sign an executive order declaring a Bitcoin reserve on his first day in office or pass legislation to establish one during his term, with many wondering whether such a move would Will lead to a cryptocurrency super cycle.

Since Wyoming Senator Cynthia Lummis introduced the Bitcoin Reserve Act earlier this year, similar proposals have been introduced in states such as Texas and Pennsylvania. Russia, Thailand and Germany are reportedly considering proposals of their own, further increasing the pressure.

If governments are racing to secure their own Bitcoin reserves, are we saying goodbye to the four-year boom-and-bust cycle in cryptocurrency prices that many believe is caused by the Bitcoin halving?

Iliya Kalchev, an analyst at cryptocurrency lender Nexo, believes that "the Bitcoin Reserve Act may be a milestone moment for Bitcoin, indicating that it is "recognized as a legitimate global financial instrument."

“Every Bitcoin cycle has this narrative that tries to push the idea that ‘this time is different.’ Conditions have never been more ideal. Cryptocurrency has never had a pro-crypto U.S. president who controls the Senate and Congress.”

The Bitcoin Act of 2024 proposed by Lummis would allow the U.S. government to introduce Bitcoin by purchasing 200,000 Bitcoins per year for five years to deposit into its vaults as a reserve asset, accumulating 1 million Bitcoins and holding them for at least 20 years.

Jack Mallers, founder and CEO of Strike, believes that Trump "may use an executive order to buy Bitcoin," but he warned that this does not amount to buying 1 million Bitcoins.

Dennis Porter, co-founder of the Satoshi Act Fund, a nonprofit that supports pro-Bitcoin U.S. policy bills, also believes Trump is exploring establishing a strategic Bitcoin reserve through executive order.

Dennis Porter announced that Trump is working on an executive order on a strategic Bitcoin reserve. Source: Dennis Porter

So far, Trump’s team has not directly confirmed claims about the executive order, but Trump was asked on CNBC if the United States would build a BTC reserve similar to its oil reserves (which could mean legislation), and he The answer was, "Yes, I think so."

Executive orders lack stability, however, as subsequent presidents often overturn such orders. The only way to ensure the long-term future of strategic Bitcoin reserves is to pass legislation with majority support.

With Republicans dominating Congress and holding only a slim majority in the Senate, Bitcoin supporters on Trump’s team have every reason to push for Loomis’ bill. However, as long as a handful of Republican defectors are swayed by the anger of progressives, they will likely block the bill from passing because they believe it hands government wealth to Bitcoin holders.

U.S. Senate and House election results following the 2024 elections. Source: Associated Press

Stop comparing this cycle to previous cycles

Earlier this month, economist Alex Krüger, founder of Asgard Markets, a macro digital asset consulting firm, said 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. As former U.S. President Richard Nixon announced that the United States would abandon the gold standard and end the Bretton Woods system, the price of Bitcoin soared from $35 per ounce in 1971 to $850 in 1981.

Kruger did not rule out the possibility of Bitcoin experiencing a bear market like it has in the past. However, he urged cryptocurrency investors "not to compare this cycle with previous cycles" because this time may be different.

Trump's actions so far are a sure sign that the administration's policies will move in a favorable direction. After Gary stepped down, he nominated Paul Atkins, a supporter of cryptocurrencies and deregulation, to serve as SEC chairman.

He also nominated cryptocurrency proponent Scott Bessent as Treasury Secretary and appointed former PayPal COO David Sacks as Artificial Intelligence and Cryptocurrency Czar, responsible for the cryptocurrency industry Develop a clear legal framework.

Super cycle theory has never achieved super results

However, the concept of “this cycle is different” has appeared in every past Bitcoin bull run, each time backed by a narrative surrounding mainstream and institutional adoption.

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 to fiat currencies.

During the 2017-2018 cycle, the rapid rise in price was considered a sign of mainstream financial adoption and the beginning of mainstream acceptance of Bitcoin, where institutional interest would flourish.

In the 2020-2021 cycle, when technology companies such as MicroStrategy, Square, and Tesla enter the Bitcoin market, they believe that many technology-related companies will follow suit.

Bitcoin’s price performance has seen peaks and lows in previous cycles. Source: Caleb & Brown

However, in each cycle, the supercycle narrative failed to materialize, ultimately causing prices to plummet, proponents to fold, and to enter a lengthy bear market. Su Zhu, co-founder of Three Arrows Capital and the most prominent proponent of the 2021 supercycle theory, believes that even without a sustained bear market, the cryptocurrency market will remain bullish and Bitcoin will eventually reach a peak of $5 million.

3AC did lend money as if the supercycle theory were true, and when it was finally liquidated, the cryptocurrency market cap fell by nearly 50% on the news, a collapse that saw lenders including Voyager Digital, Genesis Trading, and BlockFi Bankruptcy and financial distress.

Therefore, super cycles are a dangerous theory and should not be gambled with your life savings on.

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 delusion. Nonetheless, the U.S. election results provide unprecedented, extremely bullish conditions for Bitcoin, given the support of the U.S. President, who appears to be following through on his pro-crypto pledges, which include never selling U.S. Bitcoin stocks Bitcoin in .

Potential global domino effect

If the Bitcoin Reserve Act is passed, it could spark a global race to hold Bitcoin, with other countries following suit to avoid falling behind.

George S. Georgiades, a lawyer who switched from advising Wall Street firms on financing to servicing the cryptocurrency industry in 2016, told Cointelegraph that enacting the Bitcoin Reserve Act “would Marks 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 crypto investment analytics platform Blockcircle, agreed, saying the approval would be “one of the most exciting events in crypto history” because “it will catalyze a A race to get as many Bitcoins as possible.”

Other countries will have no say and they will be forced to take action. Either pivot, compete, or perish. He believes that "most countries in the G20, which are the most powerful and economically advanced countries in the world, will follow suit and build their own reserves."

Veteran cryptocurrency investor and Bitcoin educator Chris Dunn told Cointelegraph that this FOMO-based buying frenzy among countries could completely change the current cryptocurrency market cycle.

If the U.S. or other major economic powers begin to accumulate, Bitcoin could trigger FOMO, which could create a market cycle and supply and demand dynamics the likes of which we have not seen to date.

OKX exchange president Hong Fang told Cointelegraph that other countries may be ready for such a competition.

Game theory may well have quietly 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 form a lasting trend. The demand force ultimately pushes up the price of Bitcoin.

A new wave of cryptocurrency investors could change the dynamics of the

cryptocurrency market

If states become market buyers, the Bitcoin market could fundamentally change. A new wave of investors from global financial centers will flood into the cryptocurrency market, changing market dynamics, psychology and reactions to certain events.

Nexo analyst Kalchev said that while the possibility of this legislation disrupting Bitcoin’s well-known four-year halving cycle remains speculative, several dynamics could emerge.

Bitcoin is a unique market that has so far been driven 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 "investor behavior in the stock market will be different" from overreacting retail investors. Institutional investors have deep pockets and advanced risk management strategies that allow them to treat Bitcoin differently than retail investors.

Over time, Wall Street's involvement will help create a more stable, less reactive market environment. Stability is another word for reduced volatility, which logically means the bear market won't be as intense as past cycles.

Georgiades believes that "price cycles will continue" but that "continued demand from large-scale buyers such as the United States can reduce the volatility and volatility we have seen in past cycles."

At the same time, Ismail noted that the Bitcoin market has behaved differently from previous four-year cycles. Bitcoin’s price fell below the previous cycle’s all-time high (ATH) in the current cycle, which “everyone thought was impossible,” and then hit a new all-time high before the official halving. .

The four-year cycle has been exposed and broken many times

Bitcoin has only experienced four halvings so far, with nearly thirty more halving events yet to occur. “It’s hard to imagine that all of these halvings will follow the same predictable four-year pattern,” Kalchev said, especially given the impact of broader macroeconomic and political factors such as central bank policy and regulatory developments on Bitcoin’s market movements. greater impact.

Kalchev believes that Bitcoin’s price movements will be less influenced by internal mechanisms such as halving and more by external factors such as institutional adoption and geopolitical events.