The Strategist

Collapse of the Turkish lira prompts interest in crypto-currencies

08/21/2018 - 15:57

This year, the Turkish lira fell by more than 40% against the US dollar. Against this background, the interest in buying Bitcoin has greatly increased.

jeffdjevdet vis flickr
jeffdjevdet vis flickr
The Turkish lira fell to a historic low against the US dollar in light of concerns over President Erdogan's economic policy, deterioration of his relations with US President Donald Trump and his government's assumed inability to pay off its debt obligations.

The country’s population, which found that the local currency has updated the historical minimum, increased purchases of crypto currency. Even before this surge, a study by the ING banking group showed that almost every fifth person in Turkey owns crypto-monitors.

Two weeks ago, the Turkish cryptographic exchanges Paribu, Btcturk and Koinim recorded an increase in daily turnover by 100%. At the largest crypto-exchange in the country, Btcturk, the amount of concluded transactions for crypto-currencies increased to $ 11.6 million, an increase of 1.3 times per day.

Many people buy not only Bitcoin, but also XRP, Monero, Stellar Lumens and other crypto currencies. Share of the crypto-currency that belongs to some local middle class investors can reach 30% of their total savings.

Despite intransigence of the Turkish authorities and possible intensification of the crisis, it remains unlikely that transfer of savings into bitcoin will become massive. Turkish citizens understand that this venture is quite risky and the crypto currency’s penetration into the economy is rather weak.

This situation demonstrates that residents of many countries can consider crypto-currencies as an alternative to the traditional economy. The event does not mean that the broad masses of the population will switch to calculations in the crypto currency, but clearly shows that some part of society considers it as a way to protect themselves from economic problems.

Earlier, Turkey once again started discussing a possibility of creating a state crypto currency in the light of new US restrictions. So far, however, the country has been waiting on this issue. Turkey is not the only country in this region that considers issue of issuing its own crypto currency. Iran also admits that centralized crypto currency can help stabilize the economy.

But unlike Iran, where investors are forced to turn to over-the-counter platforms such as LocalBitcoins to enter into deals among themselves, as they are cut off from the global market, Turkish banks often cooperate with stock exchanges.

However, Erdogan's calls for interventions into the local currency make some fear for the future of the country's crypto-currency sector. Turkey can adopt the example of Iran and restrict access to the bitcoin exchange for its citizens.