Bitwise Chief Investment Officer Matt Hougan says that the rise of Bitcoin (BTC) after the Iran war is not a coincidence. It shows that BTC is being revalued both as digital gold and as a currency.

The argument is based on a framework that Hougan calls 'two bets in one.' For five years, the market has seen Bitcoin almost solely as a store of value. Iran's decision to impose crypto tariffs at one of the world's busiest shipping routes shows that another, much larger use is now relevant.

Bitcoin is no longer just digital gold and price forecasts have not kept up.

In a post this week, Hougan pointed to BTC's strength during the war. Bitcoin has risen by 12.25% since the USA's and Israel's airstrikes against Iran began on February 28.

The cryptocurrency has performed much better than gold (down 8.69%) and the S&P 500 (up only 1.29%), thus going against expectations that BTC would fall as a risky asset during geopolitical crises.

“Some have said that geopolitics does not matter for bitcoin, while others argue that war often leads to money printing, which could benefit bitcoin in the long run. Both arguments are wrong. Bitcoin's strength in this crisis comes directly from the conflict,” he said here.

Hougan explained that every bitcoin buyer is betting on two things simultaneously. The first is the well-known digital gold.

“You are betting that bitcoin becomes 'digital gold' and competes with physical gold in the USD 38 trillion value market. That is bitcoin's current use, and I find it an interesting bet. As I have explained here before, bitcoin could reach 1 million USD if it just takes 17% of this market over the next ten years,” he added.

But the second bet makes it more exciting. It concerns bitcoin 'being able to function as a regular currency.'

“Historically, I have seen this as a speculative opportunity—a chance for an unexpected future,” noted Hougan.

This felt far away earlier. However, Hougan pointed to the decision in 2022 when the USA, European Commission, France, Germany, Italy, the United Kingdom, and Canada excluded selected Russian banks from SWIFT.

In response, countries like China developed alternative financial systems, and Russia moved nearly all its transactions to these networks.

“I then considered that the use of SWIFT as a weapon could one day open the door for bitcoin: If countries became unwilling to trade in USD, they might eventually want a neutral alternative. And during the Iran conflict, we saw one of the first (and more uncomfortable) examples of this,” explained Hougan.

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Iran's Bitcoin tariff activates currency theory.

BeInCrypto reported that Iran planned to charge 1 USD per barrel in tariffs on ships passing through the Strait of Hormuz, payment in bitcoin. This move raises questions about sanctions. But according to Hougan,

“At the same time, it shows a reality that goes beyond the ongoing conflict: In a world where countries have used their financial systems as weapons, bitcoin emerges as a neutral alternative.”

Hougan explained BTC's potential as a currency through the theory of options pricing. An out-of-the-money option increases in value if the probability of reaching its target rises, or if market volatility increases.

The Iran conflict provided both elements. The likelihood that bitcoin can function as a currency increased thanks to Iran's tariff system. Additionally, uncertainty in the global economy rose.

Hougan suggested that this perspective shows two important things about the future of bitcoin. Firstly, availability may rise during geopolitical unrest, especially in countries between the spheres of interest of the USA and China. Secondly, it indicates that bitcoin's potential market is much larger than gold's value at USD 38 trillion.

“For five years, we have talked about bitcoin only as a 'store of value'. If bitcoin takes on a dual role—both a store of value (like gold) and currency (like the dollar)—we may need to set higher targets,” said Hougan.

In summary, five years of the 'store of value' narrative have been good for bitcoin. But what may come now could be much larger.

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