What happened?
On April 1, 2024, Iran attacked Israel directly for the first time in its history, using drones and missiles. This was retaliation for an earlier attack on the Iranian consulate in Damascus, where senior commanders of Iran's Revolutionary Guard were killed. Although Israel did not officially acknowledge the attack, it is widely assumed that it was involved.
Why are they enemies?
The relationship between these countries was not always hostile. Until the 1979 Islamic Revolution in Iran, the two were allies. However, following the rise of the new Iranian regime, opposition to Israel became a central pillar of its ideology. Iran does not recognize Israel's existence and seeks its destruction, while Israel views Iran as an existential threat, in part due to its nuclear program and its support for groups such as Hezbollah and Hamas.
The consequences for the region
This conflict has heightened tensions across the region. Iran has formed alliances with several armed groups in Lebanon, Iraq and Yemen, which act as proxies in this indirect confrontation with Israel. These militias have launched attacks on both Israel and US bases in the region, further complicating the situation.
What role do world powers play?
Israelâs ally the United States has retaliated for attacks on its troops in Iraq and Syria, while Russia has strengthened its military cooperation with Iran, exchanging technology in return for drones used in the Ukraine war. This shows how the Israel-Iran conflict not only has regional implications, but involves key global players.
What are the consequences for cryptocurrencies?
The conflict between Iran and Israel could have various consequences for the cryptocurrency market, especially since geopolitical tensions often impact global financial markets. Here are some possible effects:
1. Market volatility
The conflict between Iran and Israel could cause economic and political uncertainty in the Middle East region, which could trigger fluctuations in the prices of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH).
2. Safe haven
If the situation in Iran and Israel worsens, investors may seek to protect their assets and turn to cryptocurrencies to diversify their portfolios, which could increase the demand and price of these digital assets.
3. Impact on adoption in the Middle East
The conflict could impact cryptocurrency adoption in the region. Iran has already shown interest in using cryptocurrencies to circumvent international sanctions, and a prolonged conflict could further incentivize this use as a way to access financing and transfer value cross-border without relying on the traditional banking system. However, economic and political disruptions in the region could also slow efforts for widespread adoption of blockchain technologies in private and public sectors.
4. Cryptocurrency mining interruptions
Iran is one of the countries with the highest Bitcoin mining activity due to its low electricity costs. If the conflict with Israel results in additional sanctions or economic disruptions within the country, this could affect the ability of Iranian miners to operate, decreasing the global Bitcoin hash rate. This could increase uncertainty in the network and perhaps lead to fluctuations in the asset's price.
5. Reactions from global regulators
Tensions between Iran and Israel could also trigger responses from international regulators. If stricter sanctions are imposed against Iran, this could affect cryptocurrency exchanges operating in the region or having indirect connections. Furthermore, increasing pressure on cryptocurrency use in sanctioned countries could lead to governments and regulatory bodies stepping up enforcement measures on cryptocurrency use.
6. Reinforces the narrative of decentralization
A conflict like this highlights the vulnerabilities of economies dependent on traditional financial systems. Cryptocurrencies, being decentralized and not controlled by specific governments, reinforce their value as tools that allow wealth to be transferred and transactions to be made without outside interference. This could lead more people to see cryptocurrencies as a viable solution in times of crisis.
