After the market reacts to the conflict between Iran and the United States, is Bitcoin considered a safe asset?
Tensions between Iran and the United States earlier this month triggered a surge in bitcoin prices - or is it all wrong?
The use and implementation of Bitcoin and other cryptocurrencies can occur quite differently depending on which country in the world you are in. If these are countries with a relatively stable economy and political situation, then cryptocurrency will be primarily considered as a dangerous and risky way to earn (or lose) money.However, in countries with less stable economies and political situations, the use and status of Bitcoin must be viewed from a completely different angle. For example, in such countries during times of political upheaval and hyperinflation, bitcoin was used as a way to protect the savings of individuals and communities.Therefore, it can be argued that political and economic instability can contribute to the growth of cryptocurrency. Thus, when political tensions increase or the economy is on the verge of collapse, crypto investors around the world expect a possible surge in cryptocurrency markets.It is for this reason that crypto traders have begun to closely monitor developments in Iran since early January, when Kassem Suleimani, the commander general of the Islamic Revolutionary Guard corps, died as a result of a missile strike by an American drone. When Iran retaliated against two US military bases in Baghdad less than a week after Suleimani’s death, the price of bitcoin increased from $ 7,000 to $ 8,500.The relationship between the escalation of the conflict in the Middle East and rising BTC prices is also confirmed by Google Trends for the week ending January 8, which showed that the search query “Bitcoin Iran” was twice in the top — the first time on January 4, the day after Kassem’s death Suleimani, and January 8, after Iran’s attack on US military bases. By the end of the week, the number of Bitcoin Iran searches increased by a total of approximately 4,450%.
However, some analysts argue that, although the price of bitcoin rose against the backdrop of an escalation of the conflict between Iran and the United States, but when tensions fell, the price of BTC did not fall. This may indicate that the relationship between events and the price of bitcoin may not be as strong as it was originally thought.Moreover, Andrus Steiner, an information security expert at ArbiSmart, said that “political and regional tensions do affect the stock market and may also affect the cryptocurrency market. However, it is believed that the recent rise ... was caused by tensions between Iran and the United States, but this is not at all true. ”
“If the cause of the increase were political tensions, quotes should have returned to their previous levels after it ended,” Steiner explained. Instead, "the price continued to rise, even despite the de-escalation of the conflict."
For example, the price of gold, which also increased markedly during the conflict in the Middle East, fell after the conflict ran out. A little later, the price began to rise slowly.
Therefore, Steiner believes that “the price increase can be explained by the upcoming reduction in profits for BTC mining,” as well as “historical and organic price flows and BTC correlations.”Is Bitcoin a hedge for traders in countries with unstable economies and tense political situations?
At the same time, Steve Erlich, chief executive officer and co-founder of the Voyager crypto-brokerage platform, said that “it’s rather difficult to accurately predict what exactly makes bitcoin and the cryptocurrency market move in one direction or another,” and added that it’s also true to say that “historically, the price of bitcoin has risen in times of geopolitical upheaval.”For example, after the events of “Brexit” and “Grexit”, the price of bitcoin went up. When China announced plans to raise tariffs on US products last year, which led to a drop in the Dow, Bitcoin hit a 9-month high. ”“In January, when market participants feared the outbreak of hostilities between the US and Iran, the price of bitcoin jumped again,” Erlich said.
Bitcoin and other cryptocurrencies have also been used by individuals and communities around the world, especially in countries experiencing an economic crisis that has destabilized their national currencies, such as Venezuela and Turkey.Watching these repeated instances of price increases that seem to be wholly or partly the result of political upheavals, the question involuntarily arises of what asset Bitcoin is, given its vulnerability to changes in the market. Nevertheless, given the fact that Bitcoin can be easily acquired (and it is relatively reliable), all this indicates that Bitcoin is close in characteristics to risk-free assets or hedging.“Many consider bitcoin a hedge because, like gold, it often follows a completely different trend than the one that prevails in the traditional market and its offer is limited,” the expert concluded.
And the fact that BTC is practically not regulated by most countries around the world can give an advantage in certain circumstances: “Unlike gold, which has been stored in banks in large amounts in recent years, bitcoin has not yet been fully accepted by financial institutions and governments, which makes it potentially the best defense against global economic shocks. ”Is it the Iranians buying bitcoin or are foreign investors buying bitcoin in anticipation of the fact that the Iranians will buy it?
However, if geopolitical tensions really caused a jump in bitcoin prices, it is unclear whether this increase was the result of the Iranians buying BTC as a way to protect their assets, or whether foreign investors bought BTC in the expectation that Iranians could use bitcoin as a hedge.Peter Schiff, executive director of Euro Pacific Capital and a critic of bitcoin, wrote on Twitter that “the increased geopolitical risk was the result of both gold and bitcoin prices rising, although for various reasons. Gold is bought by investors as a safe haven asset, while bitcoin is bought by traders, with the hope that it will be bought as a safe asset. ”
In addition, the data of the Coin.Dance portal showed an almost complete absence of bitcoin movement in the Iranian currency market and on the local peer-to-peer cryptocurrency exchange LocalBitcoins.
In comparison, in June 2019, BTC trading volume against the Hong Kong dollar suddenly jumped on the LocalBitcoins exchange when protests broke out, eventually reaching an all-time high in October, when the number of demonstrations increased.
Co-founder of AgoraDesk and LocalMonero, a peer-to-peer cryptocurrency trading platform who introduced himself as Alex, said that although “some Iranians trade cryptocurrency, the cryptocurrency market in the country is still poorly developed and therefore it is very difficult to access cryptocurrency in the country.”
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It is reported that last year, bitcoin was more popular among Iranians, since with its help it became possible to send money across international borders.The sanctions that were imposed on Iran by the United States actually forced the Iranian government to consider launching its own cryptocurrency based on the blockchain as a possible way to continue working on international markets.Azari-Jahromi, Iran’s youngest minister, told IRNA State News Agency in April that there are “plans for a digital currency in the country.”In addition, Iranian President Hassan Rouhani said in December that the Islamic world needs its own cryptocurrency in order to reduce dependence on the US dollar and combat American economic dominance in international trade.This is not the only case when the government considers the creation of cryptocurrency as a way to avoid sanctions. Analysts say Venezuelan President Nicolas Maduro pursued similar motives when he decided to create Petro.In addition, in early 2018, Sergei Glazyev, economic adviser to Russian President Vladimir Putin, said the national cryptocurrency could “serve as an airbag during times of market turmoil. We can make settlements with our counterparties around the world, bypassing sanctions. ”Sanctions and Sovereignty
However, Iran’s economic situation as a result of US sanctions could create a particularly difficult economic situation for the country, and, according to Soraya Beheshti, an anthropologist with a Middle East specialization from Columbia University, “provides a lot of food for thought on the issue of sovereignty.”Beheshti explained that US sanctions “were made possible because international payments are made through Clearing House's interbank payment system (CHIPS).” Beheshti is also the founder of Karvan, an organization that creates blockchain-based products for refugees.“ , CHIPS , ”, — .
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Apparently, Iran’s plans to create a national cryptocurrency have not moved forward due to the recent conflict.And although the role of Bitcoin as a financial hedge for Iranians in this case is exaggerated, its role as a possible catalyst for political tension inside and outside Iran may be somewhat underestimated.For example, earlier this month, The Express reported that an American cryptocurrency expert and former CIA analyst, Yaya Fanusiye, warned that Iranian cyber spies could use cryptocurrency to finance the information war against the West.Fanuzi, who currently works as an assistant senior fellow at the Center for New American Security, noted that“Since cyber attacks are a form of asymmetric warfare in which involvement is always denied,” Iran can use them as a way to retaliate: “and the cryptocurrency market can be a great place for this kind of action.”He compared the possible situation in Iran with the information war that Russia allegedly waged against the United States on the eve of the 2016 elections:“The cryptocurrency market helped Russia crank up this operation. The country acquired a VPN, leased computer servers and bought domain names, and paid mainly in bitcoins, ”he said.
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Bitcoin can also be used to finance terrorist organizations. On Sunday, January 19, the International Counterterrorism Policy Institute (ICT) at the Interdisciplinary Center (IDC), a private research college in Herzliya, Israel, “announced the collection of donations for Hamas in bitcoins, an organization that has ties to Iran,” reports The Jerusalem Post.The report explains that Al Nasr soldiers, who are a military unit of a number of different Palestinian paramilitary organizations operating in the Gaza Strip, known as the People’s Resistance Committees, were funded in the past by Iran. However, due to sanctions, Iran’s funds are limited, which led to the idea of collecting donations in bitcoins. ”The fact that cryptocurrency can be used for illegal activities does not make it knowingly “bad” or “carrying a destructive beginning”. Like any other financial asset, the role that cryptocurrency plays in a specific political situation is unique for each case and cannot be reduced to a simple division into white and black.“The reality is that thieves and terrorists can profit from anything,” said Jack Choros, content marketing expert at IronMonk Solutions, pointing out that “Mexican cartels are currently making profit from avocado farms.”
“Moreover, almost any thing can be used to the detriment of people,” Jack said, adding that the benefits can also be obtained from almost any source, including the cryptocurrency market.
Source: https://habr.com/ru/post/undefined/
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