WSJ: Turks Flock to Bitcoin and Tether to Escape the Collapsing Lira

According to an article published today by the Wall Street Journal, cryptocurrencies are gaining popularity in Turkey and parts of the developing world, where the government’s economic policies have sparked a great deal of distrust.

The Turkish lira has become so volatile that Turks have ditched the local currency for riskier assets: cryptocurrencies.

While the lira plummeted against the U.S. dollar in the last quarter of 2021, the volume of cryptocurrency transactions using the lira on three exchanges averaged $1.8 billion per day, according to blockchain analytics firm Chainalysis. Those volumes are still modest compared with the findings of a 2019 Bank for International Settlements (BIS) survey that found around $71 billion in lira transactions per day, but even that is still more than any of the previous five quarters. More than a quarter.

WSJ: Turks Flock to Bitcoin and Tether to Escape the Collapsing Lira

The article wrote that Turks particularly like the dollar-pegged stablecoin Tether.

Turks have long weathered economic turmoil by holding their funds in dollars, euros or gold. The rise of cryptocurrencies in recent years has provided a new set of tools for storing wealth, albeit with far greater volatility. The lira has lost 40% of its value against the dollar since September. Bitcoin initially rose nearly 40 percent against the U.S. dollar by early November, but is now down more than 10 percent.

In Istanbul, Turkey’s largest city and commercial capital, advertisements for cryptocurrency exchanges have appeared on trams, billboards and airports. In the Grand Bazaar, shops selling bitcoin have sprung up.

WSJ: Turks Flock to Bitcoin and Tether to Escape the Collapsing Lira

Last fall, Turkish President Recep Tayyip Erdogan pushed Turkey's financial system into turmoil by pushing for multiple rate cuts amid soaring inflation. The currency has stabilized in recent weeks after the government bailed out savers, but local Turks remain cautious.

Kağan Şenay, a 27-year-old trader in Bursa, northwestern Turkey, said: “Meanwhile policies on interest rates, declining trust in published statistics on inflation and political decision-making … make cryptocurrencies a safe haven, Even though cryptocurrencies are quite risky and highly volatile financial assets.”

Şenay said he started trading bitcoin in 2017 to earn extra income. He also increasingly sees it as a way to protect his lira income from inflation.

Turks have embraced cryptocurrencies despite an official ban last year banning their use as a form of payment. Turan Sert, an advisor to Turkish cryptocurrency exchange Paribu, said the ban, announced without warning, “brought a painful experience to the Turkish crypto community.”