Worrying Lira Numbers Cause a Huge Bitcoin Spike

The Turkish lira has lost more than 60% of its value against the US dollar this year. Shocking statistics show that inflation in Turkey reached an alarming 21.7% in November. These numbers have put citizens in trouble as the rapid fall in value continues.

The value decline of the lira

Partly due to this significant drop in value, the Turkish population has turned to crypto as a hedge against inflation. As a result, crypto activity in the country has risen sharply and Bitcoin is the most adopted by citizens.

The Turkish lira has been falling since 2014 after President Recep Tayyip Erdogan took office. At the moment, the Turkish government’s central bank, like many other economies, including the United States, has refused to start winding down. However, these actions entail an increase in inflation and a devaluation of the currency.

For Turkey, the situation is worse because compared to the dollar there is not much demand for the currency. It gets even worse when you take into account that the Turkish government has kept the rates lower and lowered them. Low interest rates on loans lead to more credit, meaning more money in circulation. Low demand then leads to devaluation of the currency.

Erdogan’s views on the lira

The Turkish president continues to argue that the rate cut in 4 consecutive months is in the interest of stimulating the economy through business growth. Under ideal circumstances, the country’s top bank should raise interest rates. However, Erdogan has called such economic instruments “the mother and father of evil”.

The country’s top bank has attempted to regulate the market by creating demand for the lira using the country’s dollar reserves. However, asset manager Morgan Stanley said the following:

“We doubt whether intervention or a balanced current account will be effective in stabilizing the currency.”

Crypto turns out to be the answer

During this period, Turkish citizens have embraced crypto currencies, especially Tether’s USDT and Bitcoin. They buy these crypto currencies to protect themselves from inflation. USDT is a stablecoin whose value is pegged to the US dollar. It is also often used as an intermediate station to buy other crypto currencies.

Bitcoin’s nearly immutable code limits its supply to just 21 million units. This in a world where the supply of fiat currencies can simply be printed, so many see cryptos as a good store of value like gold. Many experts have even chosen Bitcoin over gold this year.

Interestingly, the Turkish government had previously banned cryptocurrencies. Referring to the high volatility and potential for abuse. Despite the ban, the number of daily cryptocurrency transactions in the Middle East has surpassed 1 million.

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