Last month, something weird happened to Bitcoin. It’s weird. It’s weird. The world’s most powerful computing network suddenly got a whole lot weaker. And no, this isn’t about Bitcoin temporarily falling below 100K. Uh, we don’t talk about that over here. It’s not about that. Instead, Bitcoin’s hash rate fell off a cliff, suggesting that someone pulled the plug on a huge number of miners, basically all at once. Now, who would do such a thing? Some people were quick to point their fingers at a country whose name begins with I. But there’s more to this story than meets the I. So stay tuned to find out exactly what happened and why. My name is Nick and you’re watching the Coin Bureau. So over about 10 days in June, Bitcoin’s hash rate, the measure of the computing power securing the blockchain, fell by more than 15%. It was the biggest and fastest drop in around 3 years. Whenever something like this happens, there’s no sugar coating it. It’s bad news for Bitcoin. It’s bad news. The last time we saw a drop this steep was in the aftermath of China’s minor crackdown, a seismic event in crypto’s history. China was home to around 75% of the network’s hash rate when it ordered mining facilities to shut down in mid 2021. This triggered the largest hash rate crash in Bitcoin’s history. As entire provinces went dark, the global hash rate was effectively cut in half. The network’s computational power plummeted, and for a time, there was significant uncertainty about its ability to recover. Of course, Chinese miners began a massive exodus, relocating their operations to more welcoming jurisdictions. And within a few months, Bitcoin’s hash rate had fully recovered and soon went on to hit new all-time highs. And interestingly, despite the ban, a significant amount of underground mining persisted in China, which quickly reemerged as the world’s second largest mining hub by early 2022. The great minor migration wasn’t without its hiccups. Though Kazakistan, with its low energy costs and shared border with China, became a prime destination for displaced miners. By late 2021, the country was responsible for about 18% of the global hash rate. However, this rapid unregulated boom drained the nation’s aging coal powered energy grid. In January 2022, mass protests over an unrelated spike in fuel erupted across Kazakhstan. And in response, the government imposed a nationwide internet blackout that lasted for days. With no internet, miners were knocked completely offline, causing the global hash rate to plunge by over 13% almost overnight. Soon after, the Kazaki government imposed stricter regulations and taxes, and many miners once again packed up and moved, this time primarily to the US and Russia. Much can be learned from these historical precedents. For one thing, it’s not a great idea for Bitcoin’s computing power to be concentrated in regions with a fragile infrastructure or political instability. This poses a centralization risk as the fate of a significant portion of the network is exposed to local risk factors. Then there’s the fact that a lower hash rate theoretically reduces the cost of a 51% attack where a malicious actor could seize control of the network. Though this isn’t seen as a likely threat to Bitcoin due to the network’s immense scale. On that note, the historical record does show us that Bitcoin is incredibly resilient in part thanks to the built-in difficulty adjustment mechanism. The blockchain is designed to produce a new block roughly every 10 minutes, regardless of how many miners are active. Now, to maintain this pace, the difficulty of the mathematical puzzles miners must solve is automatically adjusted every 2016 blocks or around 2 weeks. When hash rate does plummet, as it did after the China ban, the difficulty automatically decreases. And this makes it easier and more profitable for the remaining miners to find blocks, incentivizing them to stay online while also encouraging new miners to join the mining pools. And this self-regulating feature ensures the network continues to function and process transactions, albeit sometimes more slowly in the immediate aftermath of a crash after the adjustment occurs. And this suggests that the recent return of hash rate volatility isn’t something to lose sleep over. But that doesn’t mean it’s not worth our attention. Because just as in the past, the chart has some fascinating stories to tell. And by the way, if you’re enjoying this video so far, then let it be known by smashing that like button down below. And if you’re not subscribed yet, which apparently 34% of you who watch these videos aren’t, then hit the subscribe button as well and the bell for good measure to make sure YouTube gives you a bell as well the next time we release another upload. Back to the video. So about that dump last month. Naturally, the first question everyone asks was why? Crypto Twitter, which has never met a geopolitical intrigue it couldn’t spin into a conspiracy quickly settled on a prime suspect, the Islamic Republic of Iran. The timing was suspicious to say the least. The hash rate crash coincided with the bombing of Iran by Israel and the United States. In the aftermath of the attacks, reports of power grid failures and internet blackouts inside Iran caught the attention of the cryptosphere. For years, Western observers have understood Iran as a quiet but very significant hub for Bitcoin mining. The June attacks on the country seemed to be the moment the curtain was pulled back. And when you look at the data, you can see a very clear correlation. On Friday, June 20th, the Iranian government shut down most of the country’s internet, claiming it was a defense against cyber attacks. Blockchain data shows that at the same time, the global hash rate dipped by about 2.2%. A few days later, on Sunday the 23rd, strikes were reported on Iranian facilities, leading to widespread power outages, and again, the global hash rate took another hit, this time about 1%. So, case closed, right? Iran was the culprit. Well, not exactly. If you add those two events together, they only account for about 3.2% of the 15% drop. And what’s more, Bitcoin’s hash rate was already falling before any of this happened. Between the 15th and the 20th of June, it had already fallen by over 6%. So, while the blackouts and internet shutdowns in Iran certainly poured oil on the fire, the fire was already burning. So, what else was going on? Well, to find the other major factor, you have to look at the country that was dropping the bombs. No, the other one. Good. The United States is the single biggest contributor to Bitcoin’s hash rate, accounting for over 40% of the entire network. And in mid June, the US was in the middle of a brutal heatwave. And this is bad news for miners because their hardware facilities generate an enormous amount of heat and require powerful cooling systems to function properly. But when the ambient temperature is already hot, cooling is much harder and more expensive. At the same time, a heat wave means everyone is cranking up their air conditioning, which of course drives up the demand for electricity and with it the price. So basically a nightmare scenario for any Bitcoin miner. Their machines are running less efficiently and the electricity they need to power them is suddenly more expensive. Many large-scale miners in the US have contracts that actually pay them to stop mining during the peak demand and sell their power back to the grid. In places like New York, power prices hit their highest levels in months. So many American miners did the sensible, profitable thing. They powered down. And this is likely what started the downtrend. The heatwave in the US put economic pressure on the network’s biggest player. The acute shocks in Iran, the internet and power grid failure were just the cherry on the cake, accelerating the decline. But in a way, the most revealing part about this story isn’t the percentage that Iran contributed to the hash rate crash. It’s the fact that Iran was so quickly singled out as the cause of the drop. It was widespread suspicion or perhaps admission by Western crypto bros that something very significant was happening in Iran largely hidden from view. To understand what that is, we need to go back a few years to when Iran’s marriage of convenience with Bitcoin first began. It all started in 2018 when the United States re-imposed crippling sanctions on Iran, targeting its oil industry and cutting it off from the global banking system. Without access to banking networks like Swift, Iran couldn’t easily conduct international trade, leaving it financially strangled. The government needed a way to get its hands on foreign currency to pay for imports. And it needed a way to do it that was outside of the control of the US. And that’s where Bitcoin came in. Imagine you have a massive, almost limitless supply of a cheap resource in your country. For Iran, that resource is energy. Thanks to government subsidies, electricity in Iran is ridiculously cheap. sometimes as low as 1 or 2 cents per kilowatt hour. For a Bitcoin miner, that’s the holy grail because the main cost of mining Bitcoin is electricity. In late 2024, it was estimated that you could mine one BTC in Iran for an electricity cost of about $1,300. At the same time, you could sell that one Bitcoin on the international market for close to $100,000. That’s a profit margin of almost 8,000%. The Iranian government realized it could perform a kind of a digital alchemy. It could take its energy reserves, which it couldn’t easily sell because of the sanctions, convert that energy into electricity, and use that electricity to mine BTC, and then use that BTC to pay for imports. It was a way to export its energy not in an oil tanker, but over the internet. One study calculated that the electricity used by Iranian miners was equivalent to about 10 million barrels of oil a year, equivalent to around 4% of Iran’s oil exports at the time. So in 2019, the government made it official. They recognized cryptocurrency mining as a legal industry and set up a licensing system under the Ministry of Industry, Mining, and Trade. Foreign investors, especially from China, flocked in to take advantage of the cheap power. But there was a catch. If you were a licensed miner, you had to sell all the BTC you mined directly to Iran’s central bank. And by 2021, the central bank was allowing this state acquired crypto to be used to pay for imports. Since the government’s goal in facilitating Bitcoin mining was to acquire hard currency to circumvent sanctions, it was most likely forcing miners to sell to the central bank at a significant discount. We would love to know the prices that the bank was paying, but unfortunately we couldn’t find any reliable data on this. At any rate, Iran’s official regulated system was just the tip of the iceberg. The profits were so astronomical that the illegal Bitcoin mining industry exploded. In 2021, Iran’s own president admitted that something like 85% of all mining in the country was unlicensed. A huge gray market emerged. Uh people set up illegal mining farms anywhere they could get free or nearly free power. Abandoned factories, government buildings, even mosques. And this created a dual system. A small legal sector that fed crypto to the state and a sprawling underground network operated in the shadows. And this shadow network was allegedly dominated by the most powerful organization in the country. To understand what happens next, you need to understand the Islamic Revolutionary Guard Corps or IRGC. Within Iran’s political structure, the IRGC functions as both a major military force and a significant economic actor. It was created after the 1979 revolution and the reports directly to the Supreme Leader operating in parallel to the country’s regular armed forces. Over the decades, it has also developed a large complex economic portfolio with interests in sectors like construction, energy, and telecommunications, often managed through a web of foundations and affiliated companies. Given its economic role, the IRGC’s entry into Iran’s obscenely profitable Bitcoin mining sector was a logical step. By 2020, investigative reports described a quote cryptocartel of state affiliated entities, including organizations like the IRGC, launching mining operations, and these groups reportedly partnered with foreign companies to establish large-scale mining farms. By 2023, it was estimated that of the 180,000 mining devices active in Iran, approximately 100,000 belonged to the state or its affiliates. given these entities majority control of the nation’s mining capacity and this expansion had significant consequences particularly for the country’s national power grid. Iran’s grid has been under strain for years due to underinvestment and alleged mismanagement. The massive power consumption of Bitcoin mining has added to this pressure. At its peak, various Iranian officials estimated that unlicensed or illegal Bitcoin mining in the country consumed up to 2,000 megawatts of electricity, an amount equivalent to the output of two to three nuclear power plants. And this level of consumption has been cited as a key contributor to the rolling blackouts that affect the country, especially during periods of extreme heat or cold. And these outages impact industry and daily life in Iran. While official government statements have often attributed the shortfalls to high citizen consumption or small-scale illegal mining operations, a series of legislative and administrative measures have also created distinct operating conditions for state affiliated entities compared to the private miners. For example, a 2021 incident was reported where Ministry of Finance officials attempting to shut down an illegal mining center were blocked by armed IRGC units, and the Ministry of Intelligence reportedly declined to intervene. In 2022, legislation was passed allowing military institutions to establish their own private power plants and electricity lines. And more recently, the 2025 budget bill exempted IRGC bases and other affiliated institutions from paying for electricity, gas, and other utilities. And these factors have resulted in a two-tiered system where state affiliated mining operations function with structural advantages not available to the general public or licensed private businesses. Both the government and population of Iran have adopted Bitcoin as a means of sheltering themselves from the punitive western sanctions that have shut them out of the global financial markets, crippled their ability to trade, and crushed their economy. These sanctions have led to severe economic distress for Iran’s population. The national currency, the real has been in a state of near continuous collapse. While high inflation has become a persistent reality in an economic environment strangled by sanctions, storing your savings in the local fiat currency is like holding an ice cube in the desert sun. Consequently, many Iranians have sought refuge in alternative assets to preserve their wealth. Alongside traditional hedges like gold, both BTC and stable coins offer a way to get around the devaluing real and access a more stable store of value. According to one 2023 study, as many as 25% of Iranians own crypto. We suspect that for this chunk of the population, it represents not a crazy casino, but a practical way to protect savings, make international purchases, and receive funds from abroad. All of which are made difficult by sanctions. However, this puts the Iranian government in quite a pickle. Its primary goal was to use mind BTC to fund imports and bring hard currency into the country in order to survive under sanctions. But the public adoption of crypto for personal economic preservation has fueled the opposite phenomenon, capital flight. Citizens and businesses tend to use crypto to move their wealth out of Iran, seeking to avoid the punishment of Western sanctions. According to a report by Chain Analysis, crypto outflows from Iran shot up by 70% last year, reaching an estimated $4.18 billion. And this activity often spikes during periods of heightened geopolitical tension as Iranians seek the comparative safety of blockchains and crypto exchanges. And so although the government and population both seek shelter from sanctions in crypto, their interests are in tension. The very tool the government adopted to stabilize Iran’s economic health has become a significant channel for capital to leave the country somewhat undermining that goal. Faced with this dilemma, Tran’s dual approach to regulating crypto has been complex and often contradictory. On the one hand, it endorses crypto mining for generating state revenue. On the other, it attempts to curb public use to prevent capital flight. Authorities have periodically shut down realto crypto on-ramps and ordered halts on withdrawals from domestic exchanges, particularly during periods of currency depreciation. They have even imposed crypto curfews, limiting the operating hours of exchanges to manage outflows during crisis. In January 2025, the government moved to formalize its authority, designating the central bank as the sole regulator for the crypto market. Talk about hiring a fox to guard the uh hen house. For the last year, the central bank has been running a lengthy and potentially unproductive pilot of its CBDC, the crypto riol. And uh yes, that is an actual name. We’d like to think this is a tongue andcheek show of solidarity with crypto builders who show up every day just to keep grinding even as their asset is in terminal decline. But just like CBDC’s everywhere, the crypto realal represents an effort to reestablish state control over digital transactions. While Iranians use crypto to escape state oversight, the crypto realale is a tool designed to bring all digital finance back under a system of total surveillance. Now, Iran isn’t the only country trying to use crypto to get around sanctions, but its strategy is somewhat unique. Iran’s approach is one of production. It uses its own cheap energy to create a global financial network from scratch. And this is somewhat different from what we know about, for example, Russia, which has formerly endorsed the use of crypto for international trade as a means of getting around Western sanctions similar to those imposed on Iran. More recently, Russia has been working with friendly countries to launch its own rubal pegged stable coin, like a rubal pegged token run out of Kyrgyzstan, backed by a sanctioned Russian bank. The token’s market cap is literally too small for us to mention here. So, Tether probably won’t be losing any sleep over this one. We have also seen many reports that Iran has been talking with Russia about creating a similar goldbacked stable coin, too. Of course, Washington hasn’t just been sitting back and watching that happen. The US Treasury has been working overtime to sanction key players in Iran’s crypto ecosystem, including the CBDC program, major crypto exchanges, and IRGC linked individuals who allegedly use crypto to fund proxy groups. Exchanges have also been put under immense pressure. In late 2023, Binance was hit with a massive fine for processing billions of dollars in transactions for Iranians, forcing them to crack down. This has made it harder for Iranians to access the global market. But of course, this is a futile game of whack-a-ole. At its peak in 2021, Iran was estimated to control somewhere between 4.5 and 8% of the entire global Bitcoin hash rate, reportedly bringing in around a billion dollars in revenue for the government. That number has since fallen as power shortages, government crackdowns on illegal mining, and the network become more competitive globally has eroded their share. Recent estimates put it at around 3.1%. So, where were we? Oh, yes, Bitcoin’s hash rate falling off a cliff in June. Well, we mostly have a heat wave in the US to thank for that, but Iranian miners going offline were definitely in the mix there, too. not the end of the world and I bet you learned something you didn’t already know thanks to that crash. And if you want to learn something else, be sure to check out our latest video right over here. And if you’re not subscribed to the channel yet, you can do that right over here. That’s me for now. Thank you guys very much for watching and I’ll see you again soon.
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