Bitcoin Reserve Act Could Challenge the Halving Cycle: Is a New Crypto Era Beginning?

• President-elect Donald Trump plans to create a Bitcoin reserve through an executive order, aiming to position Bitcoin as a strategic asset.
• The Bitcoin Reserve Act proposes annual government purchases of Bitcoin, which could influence market cycles and drive global adoption.

President-elect Donald Trump has announced plans to sign an executive order to create a Bitcoin reserve, sparking widespread discussion about its potential impact on cryptocurrency cycles. This announcement is consistent with previous attempts like the Bitcoin Reserve Act proposed by Wyoming Senator Cynthia Lummis. Comparable suggestions have been made in other states, such as Texas and Pennsylvania, to build a strategic reserve of Bitcoins.

The Bitcoin Reserve Act would require the US government to buy 200,000 BTC per year for the next five years and keep it for at least twenty years. If this is to be realized, Bitcoin can be considered an asset in the same league as gold and oil within the national treasury. According to analysts, this move may change the perception of Bitcoin as a financial instrument and increase its acceptance globally.

Potential Effects on Market Cycles

The proposed reserve has sparked concerns over the effects it could have on Bitcoin’s four-year boom-bust pattern linked to the cryptocurrency’s halving events. Iliya Kalchev, a cryptocurrency analyst, pointed out that these interventions could mark the beginning of a new era for Bitcoin and change its narrative and the market. Some of the big financial institutions have already started including Bitcoin in their portfolio, which only strengthens the position of the cryptocurrency.

Dennis Porter, the co-founder of the Satoshi Act Fund, recently proposed that Trump may use the Exchange Stabilization Fund to implement this plan. Through supply control, the government can have a positive effect on the market prices for the benefit of the current investors. Financial analyst Seoyoung Kim also pointed out that preventing future sales of the seized Bitcoins could level or hike prices and thus increase its attractiveness as a reserve asset.

The legalization of the Bitcoin Reserve Act may lead to other countries following suit to establish their strategic Bitcoin reserves. Russia, Germany and Thailand have reportedly floated similar ideas in the past. This could lead to increased pressure, which would push up the prices of Bitcoin and alter its cycle on the market.

Alex Kruger, an economist, compared it with the gold price bounce after the U.S. dollar was delinked from gold by then-president Richard Nixon in 1971. Kruger explained that if the US and other leading economies start buying Bitcoin and storing it as reserves, it may lead to a supercycle. This cycle could produce new supply-demand dynamics and change the course of the cryptocurrency.

Strategic and Economic Implications

According to Arkham Intelligence, the U.S. government has seized over $20 billion of Bitcoin alone. Although federal officials have occasionally sold these assets, Trump’s plan to end such sales and keep a basic Bitcoin inventory is quite novel. In July, Trump commented on the benefits of holding Bitcoin, saying, “Do not sell your Bitcoin.”

By limiting the amount of bitcoins, the US can stabilize the market and improve its position. Experts think that this strategy may improve investors’ trust and increase Bitcoin’s recognition on the global level. However, critics have argued that the formation of a strategic reserve requires careful planning and policy coherence.