The Iranian rial has collapsed to 1.4 million to 1 USD, a 40% drop in value since June, prompting the CEO of Bitwise to assert that Bitcoin is a tool to protect savings against currency crises.
Protests erupted across Iran 's capital, Tehran, on Monday as the rial hit a record low against the US dollar. Locals blamed the central bank's weak fiscal policies as they watched the value of their life savings erode significantly. This crisis has fueled debate about the Vai of Bitcoin as a hedge against currency collapse.
Hunter Horsley, CEO of Bitwise, argues that Bitcoin is a way for people around the world to protect themselves against the sharp decline in the value of their domestic currencies. He wrote on X that poor economic governance is a story of the past, present, and future, while Bitcoin offers a new way for people to protect themselves.
The multidimensional crisis
According to the Financial Times, the rial has lost more than 40% of its purchasing power since the two-week war with Israel in June and is now trading at around 1.4 million rials to 1 USD. Alex Gladstein, chief strategist at the Human Rights Foundation, stressed the catastrophic collapse when compared to the official exchange rate in the early 1980s, which was just 70 rials to 1 USD. Iran's central bank governor, Mohammad Reza Farzin, resigned amid protests, further increasing uncertainty about the country's future.
Although cryptocurrency trading is permitted in Iran, regulations regarding self-custodial rights remain unclear, and Bitcoin mining is heavily regulated. Matthew Sigel, head of research at VanEck, noted that the government has taken steps to discourage people from mining Bitcoin by tightening restrictions on unregistered mining, even offering cash rewards for reporting neighbors, precisely at a time when demand for store-of-value assets is soaring.
These strict regulations have prevented Iranians from taking advantage of the extremely cheap electricity prices, which could have allowed them to mine Bitcoin at a cost of around $1,300 per BTC as of October, a fraction of Bitcoin's current price of $87,600.
Iranians are also suffering the impact of widespread sanctions imposed on the theocratic regime due to its nuclear program and support for terrorist groups in the region, leading to a significant loss of access to international financial networks and the US dollar, while weakening the domestic banking system.
In October, Bank Melli, the state-owned lending bank, went bankrupt, putting the assets of more than 42 million Iranians at risk. In February, the central bank warned eight other domestic banks that they risked dissolution if they did not implement reforms.
The situation worsened when the Iranian cryptocurrency exchange Nobitex was hacked in June, resulting in $81 million in losses, and cryptocurrency flows decreased by 11% from then until July amid the conflict with Israel.
