Bitcoin Rescues Turkey as It Has for Struggling Economies Again

Many across the world know Bitcoin differently. Some might think of it as a speculative asset with no real value, while others see it as the future of money that they must get right now. Opinions vary, and that diversity is one of the many reasons why Bitcoin should be taken seriously.

Bitcoin Rescues Turkey as It Has for Struggling Economies Again

For the vast majority of Bitcoin investors, the asset represents a way of investing and making money without going through the arduous process of signing with a broker or dealing with the constraint of the traditional financial space. However, there are several countries where Bitcoin has proven to be much more than just some asset to play with.

Over the years, Bitcoin has provided an incredible opportunity for people in struggling economies to escape the shackles of their depressing currencies and preserve their wealth. Thanks to its dollar peg and borderless nature, Bitcoin has been the asset of choice for these people time and again.

The Turkey Situation

The Turkish economy is in a bit of a bind as things stand. The lira has been falling for months now, reaching record lows in October 2020 amid geopolitical tensions and a wide array of other social factors. While the Turkish Central Bank continued to defend its performance and insist that it was handling things well, the fundamentals just didn't support its claims.

Things took an even worse turn last month as President Recep Tayyip Erdogan fired the Central Bank Governor, Naci Agbal. The firing came just a few months after Agbal had assumed his position and had mounted a campaign to help the lira get back on solid footing.

Agbal had raised interest rates to help the currency - a tactic that worked since the lira regained a fifth of its value against the dollar in 2021 alone. However, sources claimed that Erdogan had fired him due to disputes over the country's economic woes' correct response. The President wasn't in favor of the interest rate hikes, and he got rid of Agbal for not toeing the line.

Erdogan replaced Agbal with Sahap Kavcioglu - a former banker and a lawmaker for the President's party. Many believe he will be more willing to go along with the President's unconventional monetary policy proposals. It appears more like Erdogan had chosen to appoint a "yes man" to the post, and experts aren't overly pleased with the prospect of these two seemingly pairing.

Wall Street analysts reportedly expect that the lira will fall to 9.75 against the dollar over the next year, marking a staggering 15 percent drop from current levels. With the country facing an unprecedented crisis, things are pretty dire.

Bitcoin to the Rescue

However, citizens and investors don't necessarily have to fear. Many can easily save their assets in dollars and, barring that, Bitcoin. One of the hallmarks of recent economic crises is that affected people tend to lose their access to the dollar soon enough as the government controls currency supply and capital flight. If this happens, Bitcoin will become the next best thing.

In Turkey, the signs of a Bitcoin resurgence are already showing. Last week, data from Google Trends showed that searches for Bitcoin in Turkey had spiked by 566 percent. This trend shows a significant rise in Bitcoin interest from Turks, many of whom will be looking to preserve their wealth while the country navigates these murky waters.

Birds of a Feather

This won't be the first time that inflation-hit countries turn to Bitcoin for help. Argentina was in a similar situation in 2019, with the country recording inflation levels of 52.9 percent. Upon his inauguration, President Alberto Fernández began an austerity plan that would cut back on citizen's access to the dollar and force them to keep more of the Peso. Looking for a way out, citizens turned to Bitcoin.

Data from LocalBitcoins showed that Bitcoin trading volumes in Argentina had jumped in December 2019, with two weeks in the month seeing volumes above $20 million.

Venezuela is in the same boat. The country has dealt with sanctions from the United States and the international community for years, and inflation has hit astronomical levels. The problem is exacerbated by the drop in oil prices, which had damaged the value of the country's export balance sheet.

Inflation levels in Venezuela have surged over the past few years, and the bolivar is almost essentially worthless. However, citizens have also enjoyed some help from Bitcoin. Yearly trading volumes for the country hit $305 million in 2019, per data from analysts.

It also helps that the government has been pro-crypto. The Nicolas Maduro administration has extensively used cryptocurrencies, even creating Petro- an asset backed by the country's petroleum and oil reserves. Petro isn't available outside the country, but Venezuelans use it significantly for transactions and payments. It has also featured in several government initiatives as the Maduro administration hopes to keep its use alive.

Can Bitcoin Save Turkey?

As for what the future holds, it is too early to say. Turks are looking into holding more Bitcoin, and this is a good sign. Thankfully, the government also appears to be willing to let cryptocurrencies in. Last month, the Turkish Ministry of Treasury and Finance announced on Twitter that it was looking into studying digital assets more and understanding their value proposition.

"We share the rising concerns about crypto with the rest of the world. The developments (on crypto around the world) and the state of crypto in Turkey are closely monitored by our ministry. We are collaborating with the Central Bank, Banking Regulation and Supervision Agency, and Capital Markets Board within this frame under the presidency of Deputy Minister," the statement read in part.

If the government can provide an enabling environment for the market to thrive, nothing stops Turkey's citizens from easily preserving their wealth with Bitcoin.

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