Matt Hougan, Chief Investment Officer of Bitwise, stated that the rise of Bitcoin (BTC) since the Iran war began is not a coincidence, but rather reflects a structural repricing of BTC as both digital gold and currency.

This point emphasizes the framework that Hougan calls 'two-way bets in a single coin.' Over the past five years, the market has priced Bitcoin almost entirely as a store of value. However, Iran's decision to impose crypto tolls at one of the busiest maritime transport corridors in the world indicates that a larger use case is emerging.

Bitcoin is no longer just digital gold, and the price targets have not kept up.

In this week's latest post, Hougan highlighted the strength of BTC amid the war, as Bitcoin surged 12.25% since the U.S. and Israel began airstrikes against Iran on February 28.

Cryptocurrency has outperformed gold (down 8.69%) and the S&P 500 (up only 1.29%) significantly, contrary to expectations that BTC would be sold off as a risk asset during geopolitical crises.

Some claim that geopolitics has no effect on Bitcoin, while others argue that wars often lead to money printing, which benefits Bitcoin in the long term. However, both ideas are incorrect. The strength of Bitcoin during this crisis comes directly from the conflict itself, he noted.

Hougan said that those who buy Bitcoin are simultaneously placing two bets, with the first being the familiar concept of digital gold.

Everyone is betting that Bitcoin will become digital gold and compete with gold bullion in a $38 trillion value storage market. This is the current use case for Bitcoin, and I consider it a very interesting bet. As I mentioned before, if Bitcoin can capture just 17% of this market in the next ten years, the price could reach $1 million, he added.

But for the second bet, the story gets more interesting because it hinges on the possibility that Bitcoin may function similarly to traditional currencies.

In the past, I viewed this second bet as akin to buying an out-of-the-money call option, which is a speculative bet on an unlikely future, Hougan said.

Until recently, this idea seemed far from reality. However, Hougan pointed out the decision in 2022 by the United States, the European Commission, France, Germany, Italy, the United Kingdom, and Canada to remove certain Russian banks from SWIFT.

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

At that time, I thought that when SWIFT was weaponized, it might create space for bitcoin: If countries began to hesitate to transact with USD, it makes sense that they might look for politically neutral alternatives someday. In fact, in the conflict with Iran, we have seen one of the first (unsettling) examples of this, Hougan explained.

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Iran's Bitcoin fees sparked the idea of a currency.

BeInCrypto reports that Iran plans to charge USD 1 per barrel from ships passing through the Strait of Hormuz, payable in Bitcoin. This measure raises concerns about compliance with sanctions. However, Hougan noted that

At the same time, this reflects a reality that transcends the current conflict: In a world where countries weaponize their financial systems, bitcoin is becoming a politically neutral alternative.

Hougan sees the possibility of BTC becoming a currency through option pricing theory, where out-of-the-money call options gain value under two conditions: the likelihood of hitting a higher target price or the volatility of the underlying market increases.

The conflict with Iran has sent signals in both directions. The opportunity for Bitcoin to function as a currency has increased due to Iran's measures, and the volatility of the global financial system has surged.

Hougan pointed out that this perspective reveals two key issues regarding the direction of Bitcoin. On one hand, it suggests that this asset could benefit during geopolitical tensions, especially in regions caught between the power poles of the United States and China. Additionally, it indicates that the potential market for Bitcoin is far broader than the $38 trillion gold value.

Over the past five years, we have talked about bitcoin only as a 'store of value.' If bitcoin begins to play a dual role both as a store of value (similar to gold) and as a real currency (like USD), we may need to raise our targets further, Hougan said.

Thus, over the past five years, the store of value narrative has served bitcoin well, but what comes next may be much larger.

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