According to Bitwise Chief Investment Officer Matt Hougan, the Bitcoin (BTC) price rally after the start of the Iran war is not a coincidence. It reflects a structural revaluation in which BTC is seen as both digital gold and a currency.
In this discussion, Hougan utilizes the "two bets in one" framework. For five years, the markets have evaluated Bitcoin almost exclusively as a store of value. Iran's decision to impose cryptocurrency tariffs on one of the world's busiest shipping routes suggests that another, much larger use case has now emerged.
Bitcoin is no longer just digital gold, and price targets have not kept up.
In a recent publication this week, Hougan highlighted BTC's strength during wartime. At the time of writing, Bitcoin has risen 12.25% since the U.S. and Israeli airstrikes on Iran began on February 28.
Cryptocurrency has clearly outperformed gold (which has dropped 8.69%) and the S&P 500 (which has risen only 1.29%), even though many expected BTC to decline as a risk asset amid geopolitical turmoil.
“Some have argued that geopolitics doesn't matter for Bitcoin, while others emphasize that war often leads to money printing, which raises Bitcoin's value in the long run. Neither claim is correct. Bitcoin's strength in this crisis stems directly from the conflict itself,” he stated.
Hougan emphasized that every Bitcoin buyer makes two bets simultaneously. The first is based on the known idea of digital gold.
“The bets are based on the idea that Bitcoin will become ‘digital gold’ and compete with physical gold in the $38 trillion ‘store of value’ market. This is Bitcoin's current use case, and I find it an appealing bet. As I explained earlier, Bitcoin could rise to a million dollars if it captures 17% of this market over the next decade,” he added.
The second bet makes this particularly interesting. It depends on the possibility that Bitcoin could function as a traditional currency.
“I have previously considered this second bet as an out-of-the-money call option: a speculative bet on an unlikely future,” Hougan described.
Until recently, this idea seemed distant. However, Hougan mentions the 2022 decision in which the United States, European Commission, France, Germany, Italy, the United Kingdom, and Canada removed selected Russian banks from the SWIFT system.
As a result, for example, China developed alternative financial systems, and Russia shifted nearly all payments to these networks.
“At that time, I pondered that the weaponization of SWIFT could someday open space for Bitcoin: If countries begin to hesitate to transact in dollars, it makes sense that they might later prefer a politically neutral alternative. During the Iran conflict, we saw one of the earliest and most uncomfortable examples of this,” Hougan explained.
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Iran's Bitcoin customs reinforced the currency thesis.
BeInCrypto reported that Iran is planning a customs fee of one dollar for each oil barrel passing through the Strait of Hormuz, and the payment would have to be made in Bitcoin. This raises concerns related to sanctions. However, according to Hougan,
“At the same time, it demonstrates a reality that transcends the ongoing conflict: In a world where countries have weaponized their economic systems, Bitcoin has emerged as a politically neutral alternative.”
Hougan explained the potential of BTC as a currency through options pricing theory. An out-of-the-money call option gains value for two reasons: either the probability of hitting increases or the volatility of the underlying market increases.
The Iran conflict brought both phenomena. The likelihood that Bitcoin functions as a currency increased with Iran's customs system. Additionally, the volatility of the global monetary system rose significantly.
Hougan sees two significant consequences for Bitcoin's development from this perspective. First, the asset could gain traction amid geopolitical tensions, particularly in clashes over U.S. and Chinese spheres of influence. On the other hand, Bitcoin's market potential extends significantly beyond gold's $38 trillion value.
“For the last five years, we have talked about Bitcoin only as a ‘store of value’. If Bitcoin becomes both a store of value (like gold) and a real currency (like the dollar), we may need to raise our target levels,” Hougan noted.
Thus, the five-year ‘store of value’ narrative has served Bitcoin well, but the next phase could be even larger.
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