A rumor sprung to life earlier on Saturday claiming that Bitcoin was selling for $24,000 per unit in Iran. Apparently, the demand for the benchmark cryptocurrency was skyrocketing in the country in anticipation of a military standoff against the United States.
— Tommy Mustache #
(@MustacheTommy) January 3, 2020
Turns out, while not totally unsubstantiated, the rumor was more of a half-truth arising due to some onlookers overestimating the significance of Iran’s official exchange rate.
In reality, the business remains as usual in Iran’s homegrown cryptocurrency space with peer-to-peer Bitcoin trading currently hovering around the $7,000s.
Bitcoin Didn’t Hit ATH in Iran
A bit of background for those out of the loop: on Jan 3, a US airstrike near the Baghdad airport killed the most powerful general in the Iranian armed forces. It was one of the most intense escalations of recent times in the already overtly hostile relationship between Washington and Tehran.
As the Iranian establishment vowed to avenge the killing of General Qassem Soleimani, a full-scale war, or at the least, a whole new cycle of reprisals and counter-attacks seems inevitable. With the Iranian economy already struggling in the wake of lingering US-led economic sanctions, many fear that things are about to turn worse.
If things go down that route, the Iranian rial could eventually be further devalued, leaving Bitcoin and precious metals as the clearly more worthy investments. Notwithstanding that possibility, Bitcoin is far from hitting its all-time-high in Iran as opposed to what some media outlets are portraying.
Misleading Exchange Rate was the Culprit
The rumors started with some Iran-based Bitcoin sellers demanding up to 1 billion Iranian rials for 1 BTC on p2p trading platform LocalBitcoins. Based on the official rial-to-USD exchange rate, that amounts to nearly $24k per BTC.
However, the official exchange rate set by Iran’s central bank is nowhere close to the actual market rate, which is far higher. In fact, many countries with weaker national fiats usually have two separate exchange rates — one set by the central bank and the other is the actual market rate.
As we can see in Venezuela or Iran and other similar countries with a struggling economy, the official exchange rate is mostly used by select few businesses and government offices following stringent procedures. For everyone else, the actual market rate is what they have to settle with.
Going by the official rate, an Iranian can purchase $1 for about 42,000 rials as of today. So if 1 BTC is being sold for 1 billion rials on LocalBitcoins, that would mean Bitcoin price has hit a staggering premium in Iran relative to the rest of the world.
However, because the actual exchange rate is far higher than the official one, an average Iranian has to spill out a whopping 140,000 rials for buying $1. On that ground, the actual market price of Bitcoin on LocalBitcoins Iran is close to the global average, which is currently in the $7,000s as of this writing.