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Turkish Lira Volatility Drives Turkey To Crypto Adoption

 


After the Turkish lira lost up to 60% of its value against the USD over the past year, people in Turkey are turning to crypto to exchange their lira and save their money.


Turkish lira is becoming more volatile

The Turkish lira rallied 20% against the dollar in December last year after an inflation rate of 36%. Shortly thereafter, Turkish President Recep Tayyip Erdoğan announced plans to replenish his country's currency and foreclose local reserves from the market.


The exchange rate of the lira is still down about 60% against the dollar in a year. The Turkish lira has continued to slide lower in recent weeks, thanks to controversial decisions by Erdoğan to cut interest rates even further.


Efforts to save wealth despite crypto ban

To safeguard the value of their wealth, Turkish citizens are rushing to Bitcoin and USDT to convert the falling lira to save their funds.


In late 2021, the lira (TRY) started falling against the USD, with trading volume in terms of the lira increasing to an average of $1.8 billion per day across three crypto exchanges, according to Chainalysis data. In 2019, this volume was significantly higher - about USD 71 billion in lira was spent on cryptocurrencies per day.


The Turkish population is mostly after the USD-pegged stablecoin Tether. In the fall, 2,020 more investors traded lira against USDT than the TRY/USD and TRY/EUR pairs, according to CryptoCompare.


While Turkish investors used to invest their savings in USD and gold, they are now opting for cryptocurrencies: BTC and Tether. Turkish investors have made their way into cryptocurrencies, despite the fact that the law banned the use of digital currencies as a means of payment back in April 2021.


Bitcoin and Inflation

It is often claimed that the world of bitcoin has no real inflation. This statement is based on the fact that it has already been determined in advance by what percentage the number of bitcoins can grow annually. This percentage is currently rather moderate and will drop to zero in 2040. So the “bitcoin money supply” is largely fixed for the next few years.


This leads to the assertion that there is no inflation in Bitcoin. This is seen as an advantage of Bitcoin over the traditional monetary system. Bitcoin is not alone in this. There are many alternative currencies in the world that regularly claim that their system is inflation-free. The problem is that in the vast majority of cases this claim cannot be proven. Because the inflation rate is different from the growth of the money supply. This applies to traditional systems, but also to Bitcoin.


CPI of 7% in the US

Turkey is not the only nation suffering from historic inflation rates. Similar news out of the United States pushed Bitcoin (BTC) price back above USD 44,000, at least for a brief moment. Consumer Price Index (CPI) data shows that US inflation topped 7 percent in December, the highest level since the 1980s. Not only Bitcoin, but also many other cryptocurrencies reacted positively to this message.


The figures were released by the United States Bureau of Labor Statistics and showed a CPI of more than 7% in December. The BTC price fluctuated between USD 41,000 and USD 43,000 for a while. After the announcement, however, the $44,000 mark was cracked.


This time, the US Federal Reserve's coverage paid off for Bitcoin. Last week, we witnessed another bitcoin crash when news broke that the Federal Reserve was planning to take some stocks off its balance sheet. This time, however, there was actually a price increase. Federal Reserve Chairman Jerome Powell said interest rates will remain low. This is one of the reasons why the BTC price shot up.

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