Bitcoin spiked earlier this week following an escalation in tensions between the U.S. and Iran, with analysts once again linking bitcoin to so-called safe haven assets like gold.
After the head of the Iranian Revolutionary Guards’ elite Quds Force, general Qasem Soleimani, was killed by U.S. forces in Iraq it was widely reported the bitcoin price in Iran had soared to around $24,000—this is, however, based on a common misunderstanding of exchange rates in Iran.
Iran-based bitcoin sellers on peer-to-peer trading platform LocalBitcoins were seen to be pricing bitcoin at around 1 billion Iranian rials, worth some $24,000 based on the official exchange rate set by Iran’s central bank.
However, the official exchange rate set by the Central Bank of Iran is only ever used by the government and a handful of businesses. Almost all people and businesses in Iran use a market set exchange rate when converting rials to U.S. dollars—that currently has rials priced at around a third of the official exchange rate.
“The official rate is what the central bank says. But literally, no one except some government organizations can get that rate while no one can use it,” crypto expert Ali Beikverdi told bitcoin news site Cointelegraph. “It’s a joke.”
Bitcoin has been known to trade at a small premium in some places around the world, though never at the levels incorrectly reported in Iran.
In South Korea, the bitcoin price traded around 10% higher until early 2018 when the country introduced tighter regulation.
Elsewhere, bitcoin can regularly see a premium of around 4% in Hong Kong due China’s strict bitcoin trading ban forcing people who want to buy bitcoin to use the stablecoin tether.
Meanwhile, some bitcoin and cryptocurrency watchers dismissed suggestions bitcoin was acting as a safe-haven asset in response to the U.S. killing of Iran’s general Soleimani.
“Heightened geopolitical risk has resulted in both gold and bitcoin moving higher, but for different reasons,” Peter Schiff, the chief executive of Euro Pacific Capital and outspoken bitcoin critic, said via Twitter. “Gold is being bought by investors as a safe haven. Bitcoin is being bought by speculators betting that investors will buy it as a safe haven.”
“With exchange offices closed, sanctions and the rial dropping like crazy it seems like a good idea to use bitcoin,” one person in Iran, who wished to remain anonymous, said at the time, adding bitcoin was “literally the only way to get money out of the country.