Cryptocurrencies have become popular in Turkey and areas of developing economies, where people have lost confidence in the government’s economic policies.
Turkish President Recep Tayyip Erdogan threw the country’s financial system into turmoil last fall, pushing for several rate cuts despite soaring inflation. The lira has stabilized somewhat in recent years after the government’s efforts to guide a bailout, but Turkish people remain quite wary.
Kağan Şena, a 27-year-old trader from Bursa in northwest Turkey, said: “The senseless interest rate policies have dampened our confidence in the published official figures on inflation and the key decision. Cryptocurrency is becoming a haven despite its volatility and risks.”
Şenay, who works at a fabric manufacturer, said he started trading Bitcoin in 2017 to earn extra money. He then increasingly saw it as a way to protect his lira earnings amid inflation. The purchasing power of the lira has decreased along with the price increase.
Turkish people invest in cryptocurrencies despite a ban imposed last year on its use as a form of payment in the country. Turan Sert, an advisor to Turkish crypto exchange Paribu, said the ban was announced without warning, causing “a lot of pain” to the investment community. According to him, the government promises that a new cryptocurrency law will soon be presented to the National Assembly but does not have many details on its impact.
Cryptocurrencies have gained popularity in Turkey and areas of developing economies, where people have lost confidence in the government’s economic policies.
Nigerians use Bitcoin for payments after the local currency depreciated and access to foreign currency was tightly controlled. El Salvador last year became the first country to recognize Bitcoin as legal tender after two decades of its economy being tied to the dollar.
In Türkiye, people’s distrust is not limited to the lira. Two-thirds of Türkiye’s bank deposits are in foreign currencies, mainly USD and euros. Turkish banks lent some dollars to the central bank and the government – to intervene in the foreign exchange market to prop up the lira, but to no avail.
As a result, some people have used USD deposits in banks or cash to trade “stablecoins” – digital currencies whose value is pegged to traditional currencies like USD. Chainalysis says that more than half of the lira bets that fell in December were related to Tether.
Stablecoins like Tether are also used as a “gateway” to place and exit positions with volatile coins like Bitcoin and Ether. Esra Alpay, marketing director of Turkish crypto exchange Bitlo, said the number of new traders increased in the last quarter when the price of the lira plummeted.
Ege Tuluay, a 24-year-old student, walked into Caspicoin, a crypto store in the Grand Bazaar, on Monday to check the commission he received on Tether with his USD savings.
He plans to use Tether to buy other cryptocurrencies. “Cryptocurrency gives hope to the Turkish people because they have nothing left, so they want to make money,” he said.
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