Currency Collapse in Iran and Precious Metals Correction: Bitcoin as Store of Value in Focus

Dramatic Currency Collapse in Iran

The Iranian rial hit a record low against the US dollar on Monday, now standing at approximately 1.4 million rials per dollar ^[2]. The currency has lost over 40 percent of its purchasing power since the two-week war with Israel in June ^[2]. This triggered mass protests in the capital Tehran, where the population holds the central bank's fiscal policy responsible for the loss of their life savings ^[2].

For comparison: the official exchange rate stood at 70 rials per dollar in the early 1980s ^[2], as noted by Alex Gladstein, Chief Strategy Officer of the Bitcoin-focused Human Rights Foundation. Amid the protests, the governor of the Iranian central bank, Mohammad Reza Farzin, resigned, creating further uncertainty about the country's future ^[2].

Bitcoin as Protection Against Currency Crises

Hunter Horsley, CEO of Bitwise, sees the Iranian currency crisis as a reason why Bitcoin is needed. "Economic mismanagement – The story of the past, present, and future. Bitcoin is a new way for people to protect themselves," Horsley wrote in a post on X ^[2].

However, Iranians face significant hurdles in accessing Bitcoin. While trading cryptocurrencies is permitted in Iran, the rules for self-custody of crypto are less clear, and Bitcoin mining is heavily regulated ^[2]. Matthew Sigel, Head of Research at VanEck, pointed out that the government actively discourages the population from Bitcoin mining: "Iran recently cracked down hard on unregistered Bitcoin mining and even offered citizens cash rewards to report their neighbors, just as demand for stores of value skyrocketed" ^[2].

Crisis in Iran's Banking Sector

The economic crisis is exacerbated by comprehensive sanctions imposed on the theocracy due to its nuclear program and support for terrorist groups in the region. These led to the loss of access to international financial networks and the US dollar, weakening the local banking sector ^[2].

In October, the state-owned Iranian Bank Melli went bankrupt, endangering the assets of more than 42 million Iranians ^[2]. In February, the Iranian central bank warned that eight more local banks face the risk of dissolution if they fail to implement reforms ^[2].

Precious Metals Correction Opens Opportunities

Parallel to the currency crisis in Iran, the gold price corrected by over 4 percent on Monday, while palladium and silver fell by double digits ^[1]. Precious metals had recently captured the entire attention of financial markets ^[1].

Market observers see a possible rotation of investors in this development. Bulls argue that investors could now rotate into the crypto market following the recent blow-off top in precious metals ^[1].

Bitcoin Under Selling Pressure

On Tuesday morning, Bitcoin was trading at around $87,300, nearly three percent lower than 24 hours earlier ^[1]. Ethereum, XRP, and Solana also recorded similar losses ^[1]. Analyst TXMC describes Bitcoin's directionless fluctuation as "the natural result of a thin market with low liquidity and friction" ^[1]. The total volume of all Bitcoin symbols is the lowest since the early days of ETFs in the first quarter of 2024, when the price stood at $50,000 to $60,000 ^[1].

Part of the selling pressure continues to come from the United States. The Coinbase Bitcoin Premium, which measures the price difference between Bitcoin on Coinbase and the global market average, remains negative ^[1].