Iran promotes large-scale Bitcoin mining to evade US economic sanctions?

Iran's power plant holding company TPPH revealed to local media on Monday (11) that it has opened three power plants for cryptocurrency miners to purchase electricity in accordance with Iran's current regulations. The computing power of the entire Bitcoin network has also soared, reaching 143EH/s today.

In fact, it is not just the Iranian government that is attempting to use state power to promote the development of the domestic cryptocurrency field. Venezuela, North Korea and other countries are also trying to reverse their economic difficulties through Bitcoin. What impact does this have on the price of Bitcoin?

Ten years have passed since the birth of Bitcoin. Some countries that have been marginalized in the international economic system are trying to relieve pressure through Bitcoin. The most classic cases are Iran, Venezuela and North Korea.

As the cryptocurrency market continues to grow, what impact will the early layout of these marginal countries have on Bitcoin?

If you have some understanding of the international situation, you must have some idea of ​​the economic conditions of Iran, Venezuela and North Korea, all of which are targets of US economic sanctions.

A few years ago, it was revealed that North Korea had secretly maintained a group of hacker units that specialized in attacking large financial institutions, and cryptocurrency exchanges became one of their targets.

According to a UN report, North Korea not only attacked Bithumb, South Korea's largest exchange, four times in three years, but its long-term hacking operations also brought them hundreds of millions of dollars in revenue to fund the manufacture of weapons of mass destruction.

In Venezuela, in addition to senior government officials and the country's president being wanted by the US government, the local economy has also suffered from policy failures, leading to severe currency inflation and millions of citizens living below the poverty line every day.

Under this circumstance, Bitcoin has become the hope of local people. Although it is not led by the government, it can be said that the whole country is mobilizing the power of the people to promote Bitcoin.

Iran is a different story. Although it has also been sanctioned by the United States, it is still a functioning country with a basic educated citizenry and a GDP of about $500 billion, which is better than many countries.

The advantage of low electricity costs also makes Iran one of the few countries where Bitcoin mining is promoted by the government.

The common factor of these three countries is that they want to evade international sanctions through cryptocurrencies.

Why Strategically Deploy Bitcoin

As of now, the average total daily income of Bitcoin miners is about US$12 million, which is US$8 million less than before the block reward was halved in May. In addition, most of the income will be spent on electricity expenses, so miners usually put a lot of selling pressure on the market, causing the Bitcoin market price to fall.

Therefore, if a country attempts to strategically develop the Bitcoin industry, the best way is of course to start with electricity expenditure, which accounts for the highest cost of mining. Assuming that a country intends to start strategically developing the Bitcoin industry, it will generally use policies to guide the market to flourish, such as providing investment opportunities, economic subsidies, or issuing guidelines and planning blueprints.

However, taking Iran as an example, they did not do this for speculative purposes; one of the biggest reasons is that many countries that have interests in the United States are prohibited from trading with Iran due to the impact of US sanctions.

Although there are many countries such as Russia and Germany that do not care about or only partially follow US laws, for example, if Iran wants to buy timber from Siberian forests from Russia, both parties may still have to go through US agents, which will involve US banks. At this time, US banks will veto the transaction due to legal regulations.

In other words, the United States doesn't really care whether Russia wants to comply with their laws or not, because Russia basically has no other choice.

All of this will change after the emergence of Bitcoin.

With Bitcoin, Iranian merchants can send Bitcoin locally to lumber manufacturers in Siberia, who may convert it into local currency to buy tools, but for such business activities, they can use the allocated fixed amount of Bitcoin for commercial transactions, so they can temporarily ignore the price changes of Bitcoin.

Let's simply assume that Iran has a fixed allocation of $10 billion in Bitcoin for commercial trade. If the price drops, they can buy more Bitcoin at the same price, and vice versa.

In this way, not only can Iran circumvent economic sanctions, but it may also have a positive impact on the cryptocurrency market.

Market stability factors

On a macro level, the constant conversion of fiat currency and Bitcoin is equivalent to endless holdings, which is of great significance to the market.

For example, the overall market value of cryptocurrencies fell from $348.3 billion on Monday to $329.2 billion, evaporating nearly $20 billion. If these values ​​were lost due to commercial transactions, the impact on market sentiment might not be significant.

So, if there is a set of tools that can accurately assess how much volume is commercial behavior rather than speculative market operations, people can see how much pure demand there is in the market; pure demand means market stability, and stability means that holders do not care about price changes, and the instability of speculators lies in the fact that they will immediately exit the market as soon as they see signs of something wrong.

Data shows that since 2017, the daily sending volume of Bitcoin has basically remained at around US$5 billion, which is regarded as a stable basis in the market; that is to say, the average additional US$1 billion in daily sending volume may be an unstable factor. If calculated by traditional valuation methods, it means that the annual transaction volume processed by Bitcoin will reach US$365 billion.