After losing as much as 60 percent of its value against the dollar last year, Turks embrace crypto in an effort to convert their Lira’s and save their money.
Turkish Lira becoming more volatile
The Turkish lira saw a 20 percent recovery against the dollar last December after an inflation rate of 36 percent. Following quickly after, Turkish President Recep Tayyip Erdoğan announced plans to boost his country's currency and foreclose local reserves from the market.
The exchange rate of the lira has still fallen by about 60 percent against the dollar exchange rate in one year. The Turkish lira has plunged deeper and deeper in recent weeks, thanks to controversial decisions by Erdoğan to cut interest rates even further.
Efforts to save assets in spite of crypto ban
In an attempt to secure the value of their assets, Turks hastily embrace bitcoin and USDT in an effort to convert the plunging Lira and save their money.
In late 2021, the Lira (TRY) began to plummet against the USD, with trading volumes related to Lira climbing to an average of $1.8 billion per day on three crypto exchanges, according to data from Chainalysis. Back in 2019, this volume was significantly higher—approximately $71 billion of Lira spent on crypto per day.
Turkish people are mainly after the USD-pegged stablecoin Tether. In the fall, 2,020 investors traded more Lira against USDT than the TRY/USD and TRY/EUR pairs, according to CryptoCompare.
While Turks used to keep their savings in USD and gold, they now opt for crypto: BTC and Tether. Turkish investors paved their ways into crypto, despite the law banning the use of digital currencies as a means of payment as early as April 2021.
Bitcoin and inflation
It is often stated that the world of Bitcoin knows no real inflation. This statement is based on the fact that has already been determined in advance by what percentage the number of Bitcoins can grow annually. This percentage is currently rather moderate and will decrease to zero in 2040. The 'Bitcoin money supply' is therefore largely fixed for years to come.
The claim is then based on this that Bitcoin has no inflation. This is seen as an advantage of Bitcoin over the regular money system. Bitcoin is not alone in this. The world has many alternative currencies. They regularly claim that their system has no inflation. The problem is that in the vast majority of cases, this claim cannot be substantiated. Because the rate of inflation is different from the growth of the money supply. This applies to traditional systems, but also to Bitcoin.
CPI of 7% in the USA
Turkey isn’t the only nation suffering from historic inflation rates. Similar news from the United States caused the price of bitcoin (BTC) to rise above $44,000 again, at least for a moment. Data from the Consumer Price Index (CPI) show that the US inflation rate passed 7% in December, reaching its highest level since the 1980s. Not only bitcoin, but also many other cryptocurrencies responded positively to this reporting.
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 has fluctuated between $41,000 and $43,000 for a while. After the announcement, however, the $44,000 was tapped.
This time, reporting from the US Federal Reserve paid off for bitcoin. Last week, we saw another bitcoin crash when it was announced the Federal Reserve plans on taking some shares off of its balance sheet. However, it actually caused a price increase on this occasion. Jerome Powell, chairman of the Federal Reserve, said that interest rates will remain low. The BTC rate shot up because of this, among other things.