Iran has been at the center of global media attention since a U.S. drone killed Gen Qasem Soleimani, commander of the Iranian Revolutionary Guards’ Quds force, on January 2 (U.S. time). His killing ratcheted up tensions between Tehran and Washington, with many observers concerned about the potential for war. The crisis triggered a surge in global oil prices, and it also coincided with the start of Bitcoin’s rebound from under $7,000 to (as of this writing) over $8,000.
But is the conflict with Iran really generating more interest in Bitcoin?
Bitcoin’s Price Isn’t Soaring in Iran
Since 2012, the Iranian Rial (IRR)’s exchange rate has plummeted repeatedly under the weight of U.S. sanctions. Responding to the increasing cost of imported goods, Iran's policymakers adopted parallel exchange rate policies. The official exchange rate is set at 42,000 IRR/USD.
Price quotes of one billion IRR (about $24,000) on Iran’s LocalBitcoins are what gave birth to the Iran Bitcoin frenzy narrative, and at the official exchange rate, paying that much for one Bitcoin would indeed break Bitcoin’s all-time high. But as other outlets have pointed out, the real-world exchange rate for IRR is more like 110,000 to 125,000 IRR per USD. That would put the actual price Iranians are paying per Bitcoin at around $8,000, which is roughly the same price as the rest of the global market.
Additionally, it’s worth noting that as this crisis may be further devaluing the IRR, Iranians might actually be paying less per Bitcoin than the rest of is. The real-world free market exchange rate of IRR to USD is a moving target, and some have already pegged it as even higher than 125,000 IRR/USD.
Second, a quick look at Bitcoin trading volumes on LocalBitcoins makes it clear that there has been no major surge in Bitcoin trading there over the past week. Volumes have dwindled since the country cut off internet access last month.
Google, which is the most popular site in Iran, offers some additional insights into local interest in Bitcoin. Search volumes for the term “Bitcoin” in Iran fail to reveal any kind of Bitcoin frenzy, or even a meaningful increase in interest outside of a brief spike on January 8. Over the past seven days, interest has mostly fluctuated in accordance with the waking and sleeping hours of Iranians. And in the longer-term view, Iranian search interest in Bitcoin is actually down quite significantly from its highest levels of interest in Iran:
(This is not a language issue. The Farsi term for Bitcoin, بیتکوین, is a less popular Google search term in Iran than “Bitcoin”).
So interest in Bitcoin isn’t surging to new all-time-highs in Iran. But let’s widen our view. Is the Iranian crisis having some impact on the global Bitcoin price?
Bitcoin Jumps as Crisis Kicks Off
At the surface level, it does seem that there could be a connection between Bitcoin’s recent rally and the escalating Iran crisis. After all, the rally kicked off late in the day on January 2, as news of Solemani’s death was spreading and the U.S. Department of Defense was confirming the story.
Moreover, the second big spike in Bitcoin’s price came on Monday evening U.S. time, as news was spreading about Iran’s retaliatory rocket attacks. Although it’s not conclusive proof of causation, it is certainly interesting that the breaking of the two biggest news stories in this crisis has correlated very closely with spikes in Bitcoin’s price.
And if Bitcoin is really a store of value akin to “digital gold,” it’s worth noting that gold and oil prices also spiked in the wake of news of Solemani’s killing.