Will Trump's Bitcoin Reserve Proposal Usher in a Crypto Supercycle?

The mounting speculations that incoming US President Donald Trump could approve legislation to create a Bitcoin reserve have left many wondering whether the move may result in a crypto supercycle.

The mounting speculations that incoming US President Donald Trump could approve legislation to create a Bitcoin reserve have left many wondering whether the move may result in a crypto supercycle. Moreover, several countries, including Germany, Russia, and Thailand, are reportedly planning to establish their own Bitcoin reserves. So, if governments worldwide embrace Bitcoin, will this put an end to the 4-year boom-bust crypto cycle, which has been largely attributed to Bitcoin halving?

Dispatch analyst at Nexo, Iliya Kalcheve, says the approval of the Bitcoin Reserve proposal, tabled by Republican Senator Cynthia Lummis, could be a significant achievement as many countries will start to recognize the asset as a legitimate financial instrument. Introduced earlier this year, the proposed Bitcoin Reserve Act would allow the American government to add one million BTC to its treasury in a span of five years, with the purchased coins being held for not less than 20 years.

While other analysts think that the US government will begin buying Bitcoin after the approval of the proposed bill, Strike founder Jack Mallers, on the other hand, says Trump may sign an executive order on day one to enable BTC purchases. Similarly, Satoshi Act Fund founder Dennis Porter, who has been advocating for pro-crypto policies, believes the incoming president is exploring establishing a Bitcoin strategic reserve via an executive order.

As of this writing, Trump hasn’t directly confirmed rumors regarding the executive order. However, he told a CNBC journalist earlier this month that his administration will definitely create a Bitcoin reserve.

It is worth highlighting that executive orders lack stability, considering subsequent US presidents have the power to reverse them. Therefore, legislation is the only way to ensure the Bitcoin reserve is maintained by subsequent administrations. Luckily, Trump’s Republican Party controls Congress, making it easy to pass Lummis’ bill.

Earlier this week, Asgard Markets founder Alex Kruger said Trump’s victory made him optimistic that Bitcoin was poised for a supercycle. He claimed that the expected Bitcoin bull run resembles that of Gold in the 1900s. In 1971, when former President Richard Nixon adopted Gold, the asset surged from $34 per ounce to $850 within ten years. Kruger believes that Bitcoin can replicate this performance starting next year.

While he doesn’t rule out a potential bear market, he insists that this cycle is different, pointing to an incoming pro-crypto US administration. Trump’s actions since winning the election have suggested that his government will create a conducive environment that promotes crypto. For instance, he has nominated well-known crypto fan Paul Atkins to replace incumbent Securities and Exchange Commission Chair Gary Gensler. Additionally, he has picked pro-Bitcoin Scott Besset as the next US Treasury Secretary and PayPal’s former COO David Sacks as Crypto and AI czar, whose main task will be to develop a comprehensive framework for blockchain and AI technologies.

The phrase ‘this crypto cycle is different’ isn’t new, given that it has been used in other bull runs in the past, with those behind it pointing to institutional and mainstream adoption as the main factors.

In the 2013 -2014 bull cycle, analysts who supported the supercycle theory argued that Bitcoin would attract interest worldwide as the best alternative to fiat. During the next cycle (2017 – 2018), many thought the aggressive price increase was a sign of institutional and mainstream adoption, but that wasn’t the case. In the 2020 -2021 bull run, tech companies like Tesla and MicroStrategy entered the crypto scene. At the time, several analysts claimed that other tech firms would follow suit, thus sustaining the bull cycle.

However, the narrative failed as prices crashed, with Bitcoin and other digital assets entering an extended bear market.

Nevertheless, most analysts are optimistic that the incoming US administration will create bullish conditions, potentially prolonging the ongoing bull run.