TEHRAN, IRAN - (ARCHIVE): A file photo dated September 18, 2016 shows Iranian Revolutionary Guards' ... [+] Quds Force commander Qasem Soleimani during Iranian Supreme Leader Ayatollah Ali Khamenei's meeting with Revolutionary Guards, in Tehran, Iran. The U.S. confirmed Thursday that it carried out a strike that killed Iranian Revolutionary Guards' Quds Force commander Qasem Soleimani in the Iraqi capital Baghdad. The strike near Baghdad International Airport killed Soleimani, one of the most powerful commanders of Iran's Revolutionary Guards, and Abu Mahdi al-Muhandis, vice president of the Hashd al-Shaabi group, or Popular Mobilization Units (PMU), local media reported. (Photo by Pool / Iranian Supreme Leader Press Office /Anadolu Agency via Getty Images)
The bitcoin price got a shot in the arm as news came out last night that theU.S. assassinated Qassem Soleimani, head of the feared and formidable Iranian Revolutionary Guard Corps (IRGC).
As of this writing, the bitcoin price is up 4.74%, approaching $7,400. It is tempting to take this observation and assume that bitcoin will continue to climb as tensions between the two countries continue to ratchet upwards.
All of this feeds the narrative that bitcoin is a safe haven asset.
This may be true, and the price of bitcoin may continue to rise. However, the expected fallout will serve as a defining test of Bitcoins presumptive role as currency of last resort or the final port in the storm.
Soleimani was the Tip of the Iranian Spear
It is hard to overstate the impact of Soleimanis assassination. While few outside of Iran will mourn his passing, there is no denying the level of power and influence that he held in Iran and around the region as a whole.
Aveteran of the devastating decade-long Iran-Iraq War in the 1980s, one which most people outside of the region have likely never heard of, Soleimani grew to become a glorified and almost mythical figure within Iran.
By leading the IRGC, he was a central player in virtually every major Iranian action in the region, including defense of the Assad Regime in Syria, securing Iranian influence in Iraq (lest the two countries ever go to war again), or supplying and supporting Hamas and Hezbollah against Israel. Some of his lesser-known activities included backing the Houthi rebels in Yemen and other groups across Afghanistan and Pakistan.
Taking out Soleimani was analogous to the U.S. losing a Secretary of Defense or National Security Advisor.
Map Strait of Hormuz and Persian gulf countries
A Stick of Dynamite into a Tinderbox
With this context, it is unsurprising thatJoe Biden likened the Soleimani assassination to tossing a stick of dynamite into a tinderbox. After all, while the world is surely better without Soleimani, nobody really knows what will happen next. All we do know is that the Iranian Supreme Leader Ayatollah Khameneivowed to take tough revenge against the U.S.
The anticipated response in and of itself should be enough to rattle markets and drive investors toward safe havens. Iranian-backed forces reach as far west as Turkey, south as Yemen, and east as Pakistan. If we take into account cyber or terrorist attacks, the entire world comes into play.
Further complicating the issue is the fact that this drama is playing out during a period of already heightened tensions in the region. U.S-Iranian relations were already poor following President Trumps withdrawal from the 2015 Iranian Nuclear Deal and application of his maximum pressure campaign against the country.
Arab Spring-esque protestshave also broken out across the region in countries such as Lebanon, Iraq, Algeria, and even Iran against causes such as income inequality or political freedom. In fact,Iraqi Prime Minister Adel Abdul MahdiandLebanese Prime Minister Saad Haririboth resigned in recent months in response to their inability to calm the protests.
Plus, there is currently aproxy war playing out in Libyapitting Turkey and the United Nations against Egypt, the United Arab Emirates, and Russia, among others.
It is hard to think of a worse time in the region for someone to light a match.
What Comes Next
Iran is unlikely to provoke all-out war against the U.S., as Khamenei and the rest of the leadership in Tehran are well aware that the fighting will largely take place in their home country (Iran does not have conventional military means of reaching the U.S.).
More likely, they are going to leverage their proxies across the region to attack U.S. allies and soft targets as they seek to exact revenge. For instance, they could try a repeat of theirattack on Saudi oil infrastructure in September 2019or disrupt the transit of oil through theStrait of Hormuz(which accounts for 20%) of the global supply.
The U.S. is on heightened alert,is deploying thousands of troops back into the region, and the State Department asked all Americans toleave Iraq immediately.
Map of the Middle East with Saudi Arabia in focus with bullets draped across
Trial By Fire
If there ever was a time for bitcoin and crypto to prove itself, this is it.
Safe havens like bitcoin, gold, and U.S. treasuries are up, while emerging market currencies have seen their biggest fall since September 2019.
These broad trends will likely continue if tensions escalate and people will seek alternatives to preserve their wealth.
However, the story is not this simple.
For the bitcoin price to continue to climb in the face of this instability, it needs to prove its resiliency and relevancy in local market conditions. Put another way, it must demonstrate utility. This means that there need to be on-ramps to the network, consistent Internet access or dense mesh networks, and users must have ways to simultaneously maintain privacy (perhaps from governments), but still find counterparties for commerce. Leigh Cuen fromCoinDeskwrote an excellent piece detailing some of these challenges in emerging markets around the world.
Now, this may be too much to ask of bitcoin right now, as it remains in its infancy, but at the same time it is hard to imagine a better proving ground for crypto.
Read more here:
U.S. Assassination Of A Major Iranian Official Poses An Unprecedented Test Of Bitcoins Role As A Safe Haven Asset - Forbes