Bitcoin Reserve Act: Could This End the 4-Year Crypto Boom-Bust Cycle?

The Bitcoin Reserve Act, introduced earlier this year by Wyoming Senator Cynthia Lummis, is sparking heated discussions in both crypto and political circles. With speculation mounting that President-elect Donald Trump may sign an executive order or champion legislation to establish a Bitcoin Reserve, many wonder if this bold move could break Bitcoin’s four-year halving cycle and lead to the elusive crypto supercycle.

Here’s how this legislation could transform the crypto market forever.

1. What Is the Bitcoin Reserve Act?

The Bitcoin Reserve Act 2024, proposed by Senator Cynthia Lummis, aims to:

• Allow the U.S. government to add Bitcoin to its treasury as a strategic reserve asset.
• Authorize the purchase of 200,000 BTC annually for five years, leading to a 1 million BTC reserve held for at least 20 years.

While the legislation is still under consideration, states like Texas and Pennsylvania have introduced similar proposals, and nations such as Russia, Thailand, and Germany are reportedly exploring their own Bitcoin reserve plans.

2. How Could a Bitcoin Reserve Break the 4-Year Cycle?

Bitcoin’s price has historically followed a four-year boom-bust cycle tied to its halving events, where miner rewards are cut in half, reducing new Bitcoin supply.

The Current Cycle:

• Bull runs (price surges) coincide with reduced supply post-halving.
• Bear markets (price crashes) follow as hype fades and supply-demand dynamics stabilize.

If major governments and institutions start accumulating Bitcoin as a reserve, demand could overwhelm the predictable halving-driven supply cycle, potentially breaking the boom-bust pattern.

“The Bitcoin Reserve Act could mark the end of the halving cycle’s dominance,” says Iliya Kalchev, an analyst at Nexo. “Institutional adoption and geopolitical events may take center stage.”

3. Supercycle Speculation: Is This Cycle Different?

The term “supercycle” refers to a prolonged bull market without the typical bear market correction. Advocates believe the Bitcoin Reserve Act, coupled with pro-crypto policies under Trump’s administration, could trigger this phenomenon.

Supporters’ Perspectives:

• Jack Mallers (CEO, Strike): Suggests Trump could use an executive order to initiate a Bitcoin Reserve on Day 1 of his presidency.
• Alex Krüger (Economist): Argues that current conditions resemble gold’s meteoric rise in the 1970s, which followed the U.S. abandoning the gold standard.
• Dennis Porter (Satoshi Act Fund): Believes a U.S. Bitcoin Reserve would force other nations to compete, triggering a global FOMO race to accumulate Bitcoin.

“If the U.S. leads, other countries will follow. It’s game theory in motion,” says Hong Fang, President of OKX.

4. Could the Supercycle Narrative Repeat Past Mistakes?

The supercycle theory isn’t new—it has emerged during every past Bitcoin bull market:

• 2013-2014: Bitcoin’s rapid rise was thought to signal global adoption.
• 2017-2018: Institutional interest fueled predictions of sustained growth.
• 2020-2021: Corporate buyers like MicroStrategy and Tesla sparked hopes of a “new normal.”

Each time, the supercycle failed, followed by sharp corrections and extended bear markets.

Cautionary Tales:

• Three Arrows Capital (3AC): Bet heavily on a supercycle in 2021 but collapsed when the market turned bearish, causing a ripple effect of bankruptcies across the industry.
• Chris Burniske (Placeholder VC): Calls the supercycle narrative a “collective delusion,” warning investors not to place blind faith in it.

“Supercycle bets have historically ended in disaster for those who over-leverage,” Burniske warns.

5. The Global Domino Effect: A New Crypto Race

If the U.S. adopts the Bitcoin Reserve Act, it could trigger a global arms race for Bitcoin.

Why Other Nations May Follow:

• Avoid being left behind in global financial competitiveness.
• Protect national economies against potential dollar devaluation.
• Secure their own strategic Bitcoin reserves in response to U.S. accumulation.

Countries Eyeing Bitcoin Reserves:

• Russia: Already proposed its own reserve plan to rival the U.S.
• Germany and Thailand: Reportedly considering similar moves.
• G20 Nations: Analysts predict widespread adoption among economically advanced countries.

“This could catalyze a race to acquire as much Bitcoin as possible,” says Basel Ismail, CEO of Blockcircle.

6. How Would a Bitcoin Reserve Impact the Market?

Market Stabilization:

Institutional and government participation could reduce market volatility over time, as deep-pocketed investors manage risk more effectively than retail traders.

Supply Shock:

With governments and institutions holding significant reserves, Bitcoin’s already limited supply could become even scarcer, driving long-term price growth.

Shifting Market Dynamics:

• Retail dominance could give way to institutional control, leading to more stable, less reactive markets.
• Historical four-year cycles may become less predictable as external factors like regulation and geopolitics play a larger role.

7. Could the Halving Cycle Really End?

While Bitcoin’s halving events will continue to reduce supply every four years, analysts like Iliya Kalchev believe their influence will diminish as broader adoption takes center stage.

“Bitcoin’s price will become less tied to halving mechanics and more influenced by institutional demand and macroeconomic trends,” says Kalchev.

However, skeptics argue that market psychology—driven by the halving narrative—may remain a powerful force, keeping the cycle alive.

Conclusion: A Pivotal Moment for Bitcoin?

The Bitcoin Reserve Act represents a potential turning point for global Bitcoin adoption. Whether it breaks the four-year halving cycle or not, the legislation could:

• Spark a global Bitcoin accumulation race.
• Reduce market volatility through institutional participation.
• Establish Bitcoin as a legitimate reserve asset alongside gold.

While the supercycle narrative carries risks, the conditions for unprecedented Bitcoin growth have arguably never been stronger. As governments and institutions compete for dominance in the crypto space, one thing is clear: Bitcoin’s future will be anything but predictable.

FAQs

1. What is the Bitcoin Reserve Act?
The Bitcoin Reserve Act proposes that the U.S. government accumulate 1 million BTC over five years as a strategic reserve asset.

2. Could the Bitcoin Reserve Act end the halving cycle?
If governments and institutions become major Bitcoin holders, demand could outweigh the supply-driven effects of halving events, potentially disrupting the cycle.

3. What is a Bitcoin supercycle?
A supercycle refers to a prolonged bull market without the usual bear market corrections, driven by unprecedented adoption and demand.

4. Which countries are considering Bitcoin reserves?
Russia, Germany, Thailand, and several U.S. states (Texas, Pennsylvania) are exploring Bitcoin reserve proposals.

5. Will Bitcoin become less volatile?
Institutional and government participation could stabilize the market, reducing volatility and the severity of bear markets.

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