Traders are not pricing in the possibility that Bitcoin will take a hit. An outbreak of fighting between President Donald Trump and Iran could shut down Iran’s mining pipelines and deprive it of $1 billion in annual crypto revenue.
Iran can mine Bitcoin for about $1,320 per coin with subsidized electricity and sell it for nearly $68,000. This is a 50x gross profit based on electricity costs alone. Electricity costs 0.5 cents per kilowatt hour. Some 700,000 mining rigs are said to be pumping out 2,000 megawatts every day while civilians face rolling blackouts.
According to the Trump administration, 95% of these rigs are illegal. The Revolutionary Guards are involved in the largest operations and are said to be exempt from electricity charges.
Bitcoin is being used to evade sanctions by converting state-subsidized energy into dollars that cannot be touched by the SWIFT ban. Each block mined with that electricity supplies that flow.
Iran’s hash rate is estimated at 2% to 5%, or 1 in 25 blocks, and this is verified by machines said to be funding the IRGC. The IRGC is described as concentrating troops on the Iraqi border, operating missile batteries that F-22s are sent to take over, and nuclear facilities that B-2s are programmed to destroy.
Attack on Iran’s power grid could wipe out mines
Moreover, Iran’s power grid is crippled, as the load of cryptocurrency mining is comparable to the electricity demand of a medium-sized city.
“Military operations targeting critical infrastructure, command nodes, radar facilities and military communications will be cascaded through the same power grid that powers the mines,” said independent market analyst Shanaka Anslem Perera.
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JPMorgan estimates that a seven- to 10-day air operation could reduce Iran’s power generation by 30 to 50 percent.
“The global Bitcoin hashrate will drop by 2 to 5 percent overnight,” Shanaka predicts.
Markets are pricing Iran risk into oil, not Bitcoin. All hashes generated in Iran are based on a countdown timer. When the grid is decommissioned, so is the hashrate, and the IRGC loses its last unauthorized revenue source.
Brent crude oil futures rose $1.13, or 1.6%, to $71.88 a barrel by 1030 GMT. US West Texas Intermediate rose $1.10, or 1.7%, to $66.31. For the week, Brent was expected to rise 0.2%, while WTI was expected to fall 0.1%.
President Trump said about a week ago that “really bad things” would happen if Iran did not reach an agreement on its nuclear program within 10 to 15 days.
Bitcoin retail investors run out of cash in news headlines
At the time of writing, Bitcoin has plummeted to $65,000, according to TradingView data. Blockstream CEO Adam Back believes Bitcoin lacks downside support because retail investors are “all in” and don’t have the cash left to buy on the dip. He linked this to a 25% decline year-to-date.
“Bitcoin tends to be a little more vulnerable to downsides because a lot of retail investors end up going all-in,” Buck said. He added: “They don’t have a lot of money to buy Bitcoin.” He likened this to investing in stocks. Mutual funds can sell Microsoft and buy Tesla when Tesla looks cheap.
See also JPMorgan Bank opens access to BTC, ETH funds to customers
Iran and the United States held several hours of indirect negotiations Thursday over Tehran’s nuclear program before leaving without a deal. The United States has amassed a fleet of aircraft and warships in the region.
Omani Foreign Minister Badr Al Busaidi mediated the talks in Geneva. He said there had been “significant progress in negotiations” but gave no details.
Shortly before the talks ended, Iranian state television reported that Tehran was determined to continue enriching uranium, rejected proposals to deport it and called for the lifting of international sanctions, suggesting it was not ready to meet President Trump’s demands.
Iran’s foreign minister said talks with the Trump administration were among the country’s “most intense and longest negotiations.” “We have a clear indication from our side of what should happen,” Abbas Aragushi said, without giving specifics.
Meanwhile, China on Friday advised its citizens to avoid traveling to Iran and called on Iranian nationals to evacuate as soon as possible.
Iranian Prime Minister Ali Hosseini Khamenei told parliament: “Let us be clear to our nation’s leaders: When we say ‘Death to America,’ we mean the death of Trump and his team, not the death of the American people.”
