Turkey is struggling with economic uncertainty and unconventional policies, and the Lira has fallen to a new record low against the US dollar. As individuals look for alternatives in the middle of the Lira’s fall, Bitcoin is concurrently enjoying a rise in demand and fetching a big premium in Turkey.
The top cryptocurrency by market cap is still holding steady over the $30,000 mark at press time, and the country’s increasing interest in Bitcoin demonstrates a hunt for alternative financial assets.
Macroeconomic and Political Situation in Turkey
Turkey’s macroeconomic and political environments are fraught with serious difficulties. The nation has been dealing with a deteriorating economy, soaring inflation, and unconventional policies.
It has alarmed international markets and investors. The long-held unconventional policies of President Tayyip Erdogan have increased the uncertainty around Lira and the nation’s economy.
Lira Continues to Sink Against the Dollar
According to reports, the Turkish Lira has been falling dramatically against the U.S. dollar, hitting a new record low. On Friday, the Lira weakened by as much as 3.3%, following a 5.2% slump after the recent rate-setting meeting led by Governor Hafize Gaye Erkan.
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The bank’s Monetary Policy Committee said,
“Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved.”
Market expectations were of a greater tightening to fight inflation. But the central bank’s rate hike, which increased the main rate by 650 basis points, fell short of those forecasts. It was raised from 8.5 percent to 15%
. As a result, the Lira has depreciated significantly, dropping by 27.3% this year alone, according to Bloomberg.
According to World Data, the country’s average annual inflation rate between 1960 to 2022 ranged at 32.6%.
Bitcoin Commands a Heavy Premium in the Country
Amid the economic turmoil, another interesting trend has emerged in Turkey. Bitcoin is commanding a heavy premium in the country as a popular crypto. The weakening value of the Turkish Lira and concerns about the stability of the traditional financial system have driven many individuals to turn to Bitcoin as an alternative store of value.
Crypto influencer and investor Luke Broyles highlighted this trend, noting that Bitcoin was not making new all-time highs, but Turkey’s local currency was falling. He stressed that the development in Argentina seen last month also led to a fresh high for Bitcoin. It was due to, in large part, because of the local currency’s considerable devaluation.
As a result, stablecoins like Tether saw steep expansion in the region. Lebanon is another great crypto adoption story due to the sovereign’s inflationary problems.
In the meantime, Bitcoin continues to hold its ground and is currently trading above $30,000 after a recent comeback.
In the month that followed President Erdogan’s reelection, BeInCrypto also reported on the currency’s deterioration. The local currency’s sharp decline worsens Turkey’s economic problems because it has already lost more than 90% of its value in the last ten years.
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