A Bitcoin Reserve Act may end crypto’s 4-year boom-bust cycle

The Bitcoin Reserve Act could end the halving cycle. Will this four-year cycle turn out differently, and will we enter the mythical Supercycle? With speculation growing that incoming President Donald Trump may sign an executive order creating a Bitcoin Reserve on day one or pass legislation to establish a Reserve during his administration, many wonder if the move will result in a crypto supercycle.

Since Wyoming Senator Cynthia Lummis presented the Bitcoin Reserve Act earlier this year, states such as Texas and Pennsylvania have submitted similar bills. Russia, Thailand, and Germany are reportedly mulling their offers, increasing the pressure. 

If governments compete to safeguard their Bitcoin holdings, would we see an end to the four-year boom-bust cycle in crypto values, which many ascribe to Bitcoin’s halving?

According to Iliya Kalchev, a dispatch analyst at cryptocurrency lender Nexo, “the Bitcoin Reserve Act could be a milestone occasion for Bitcoin, signalling its “acceptance as a viable global financial asset.”

“Every Bitcoin cycle has a narrative attempting to promote the notion that ‘this one is different.'” The conditions have never been more favourable. Crypto has never had a pro-crypto US President who controls both the Senate and the Congress.

Dennis Porter, co-founder of the charity Satoshi Act Fund, which supports pro-Bitcoin US policy measures, believes Trump is considering creating a strategic Bitcoin reserve by executive order.

So far, Trump’s team has not directly confirmed the allegations about an executive order. However, when asked on CNBC if the US would create a BTC Reserve comparable to its oil reserve (which may require legislation), Trump responded, “Yes, I think so.”

However, presidential orders are short-lived since they are regularly revoked by subsequent presidents.

The only way to assure the long-term viability of a strategic Bitcoin reserve is through majority-supported legislation. Bitcoin supporters on Trump’s team have a strong case to push Lummis’ measure, given Republicans control Congress and hold a small majority in the Senate. However, a few Republican defectors, driven by progressive fury at allegedly giving over the government’s wealth to Bitcoiners, could defeat the bill.  

‘Stop comparing this cycle to prior cycles’

Earlier this month, Alex Krüger, economist and founder of macro digital assets advice firm Asgard Markets, stated that the election results convinced him that “Bitcoin is highly likely in a supercycle.” He argues that Bitcoin’s unique condition can be compared to gold, which rose from $35 per ounce in 1971 to $850 in 1981 when former US President Richard Nixon removed the US from the gold standard, effectively terminating the Bretton Woods system.

Krüger would not rule out the potential of Bitcoin experiencing a down market, as in previous cycles. However, he urged crypto investors to “stop comparing this cycle to prior cycles” because this time may be different.

He has also nominated pro-crypto Scott Bessent as Treasury Secretary and appointed former PayPal Chief Operating Officer David Sacks as AI and crypto czar, entrusted with creating a clear regulatory framework for the crypto industry.

Supercycle theory has never had super results

However, the concept of “this cycle being different” has emerged in each previous Bitcoin bull market, accompanied by narratives of mainstream and institutional acceptance. During the 2013-2014 bull run, the supercycle theory was bolstered by the belief that Bitcoin would gain international traction as an alternative asset to cash.

During the 2017-2018 cycle, rapid price appreciation was interpreted as a harbinger of mainstream financial adoption and the beginning of Bitcoin’s mainstream acceptability, where institutional interest would thrive.

When tech businesses like MicroStrategy, Square, and Tesla entered the Bitcoin market in 2020-2021, they expected many other tech companies to follow suit.  

Su Zhu, co-founder of Three Arrows Capital, was the most prominent proponent of the Supercycle Thesis in 2021, saying that crypto markets will remain bullish without a lengthy bad market, with Bitcoin eventually peaking at $5 million.

3AC borrowed money as if the supercycle hypothesis was true, and when company was eventually liquidated, the crypto market cap plunged by about 50% on the announcement, resulting in bankruptcies and financial troubles for lenders such as Voyager Digital, Genesis Trading, and BlockFi.

So a supercycle is a risky theory to place your life savings on.

Chris Brunsike, a partner at startup capital company Placeholder and former blockchain product director at ARK Invest, believes the Bitcoin supercycle is a fiction.

Nonetheless, the US election results have overwhelmingly supplied Bitcoin with unprecedented and extremely optimistic conditions, particularly with the backing of a US President who appears to be following through on his pro-crypto commitments, including never selling Bitcoin from the US Bitcoin stockpile. 

The potential global domino effect

If the Bitcoin Reserve Act is passed, it may spark a worldwide holding race in which other countries follow suit to avoid falling behind.

George S. Georgiades, a lawyer who switched from advising Wall Street firms on capital raising to working with the crypto industry in 2016, told Cointelegraph that passing the Bitcoin Reserve Act “would mark a turning point for global Bitcoin adoption” and would likely “trigger other countries and private institutions to follow suit, driving broader adoption and enhancing market liquidity.”

Basel Ismail, CEO of Blockcircle, agreed, stating that acceptance would be “one of the most bullish events in crypto history” because “it’ll catalyse a race to acquire as much Bitcoin as possible.”

The new wave of crypto investors may alter crypto market dynamics

If states become market purchasers, the Bitcoin market would most certainly undergo significant changes. A new influx of investors from global financial centres would flood the crypto markets, altering market dynamics, psychology, and reactions to specific events.

While it is yet hypothetical if new legislation will disrupt Bitcoin’s well-known four-year halving cycles, Nexo analyst Kalchev believes several dynamics may emerge.

Bitcoin is a one-of-a-kind market, driven mostly by retail buying and selling, with prices that are extremely responsive to market psychology. The introduction of new sorts of investors could affect market dynamics and historical cycles.

Ismail believes that “investors from the equities market will behave differently” than overly reacting individual investors.  

“Over time, Wall Street’s participation could contribute to a more stable, less reactive market environment.”

Stabilisation is another way of expressing less volatile, which implies that bear markets would be less forceful than in previous cycles.

According to Georgiades, “price cycles will persist,” however “sustained demand from large-scale buyers like the US could reduce volatility and the swings we’ve witnessed over past cycles.”

Meanwhile, Ismail noted that the Bitcoin market is already performing differently than in prior four-year cycles. Bitcoin’s price plummeted below the previous cycle’s all-time high (ATH), “which everyone believed was impossible,” and then achieved a new ATH before the formal halving occurred. 

“The four-year cycle has already been debunked and broken multiple times now.”Bitcoin has only witnessed four halvings, with over thirty more to come. “It’s difficult to imagine that all of these halvings will follow the same predictable four-year pattern,” said Kalchev, especially since broader macroeconomic and political factors—such as central bank policies and regulatory developments—have a greater impact on Bitcoin’s market trajectory. 

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