Turkey’s economy has gone through immense turmoil this year, as the country’s native fiat currency, Lira, suffered from high levels of inflation: losing 44% of its value by 3 January due to a 36% rise in inflation.
By 7 January 2021, we observed that the currency’s 90-day historical volatility had risen to an annualized 65% (as per TradingView data), increasing fivefold in just two months time. This meant that Lira was now more volatile than bitcoin, who’s historical volatility recently dropped to 61%.
Amidst such levels of volatility in their native currency, many Turks have ditched Lira for assets with an even riskier reputation: cryptocurrencies, Wall Street Journal reports. Such a shift to crypto is becoming increasingly likely in parts of the developing world where government policies spark discontent among the population.
The widely spread distrust in the government originates from Turkish President Recep Tayyip Erdogan’s strategy of reducing interest rates even in times of rising inflation, hence contradicting basic economic orthodoxy. Several central banks of the country have been replaced for opposing these cuts, Coindesk notes.
Surge In Crypto Trades, Tether Comes Out On Top
With the rise in crypto investments, cryptocurrency trading volumes using the lira leapt to an average $1.8 billion a day across three exchanges, Chainalysis reports. And the people of Turkey are particularly optimistic about stablecoin tether, whose value is pegged to the dollar. This fall, trades that utilised lira against tether outpaced even the dollar and euro, turning into the most traded government backed currency against tether.
The Wall Street Journal also stated that the turkish population have long weathered such times of economic instability through storing their money and assets in the form of gold, dollar or euros. However, this time around, the emerging market for digital currencies brought with them a more volatile yet novel instrument for storing their finances, with many turks jumping on the crypto bandwagon as lira continues to plummet in value.
In the commercial capital city of this country, Istanbul, advertisements promoting cryptocurrencies and cryptocurrency exchanges can be seen in trams, billboards, and even in their airports. Where traders sold gold and foriegn currencies, shops selling Bitcoin have sprouted in the Grand Bazaar as well.