As rising prices hit Western countries hard, many Turks have found a fairly new way to reduce the impact of inflation: crypto.
Inflation crossed the 80% mark in August in Turkey, at 80.21% year-on-year, up from 79.6% in July, the highest level since 1998, according to official data released Monday.
This sharp rise in prices is largely explained by the collapse of the Turkish lira, which has lost nearly 55% of its value in a year against the dollar. Contrary to conventional economic theory, President Recep Tayyip Erdogan believes that high interest rates encourage inflation. But his heterodox monetary policy has led to a fall in the national currency, fuelling rising prices.
The Turkish Central Bank surprised the markets again in mid-August by lowering its main policy rate from 14% to 13% despite soaring inflation.
“The biggest problem we are facing now is the cost of living,” acknowledged the Turkish head of state last Tuesday, who nevertheless refuses to change his economic policy nine and a half months before the next presidential election.
25% of the population owned or had owned a crypto in 2021
Turkey is known as an undemocratic nation whose crypto is not welcome. However, it has one of the highest rates of cryptocurrency ownership in the world, which shows that bitcoin is used for more than just risky speculation.
For Johnny Lyu, CEO of KuCoin, Turkey is one of the top 5 markets for KuCoin and is growing very fast. KuCoin’s Turkish director, Kafkas Sönmez, said that global exchanges are entering Turkey to gain attention, with the offline marketing element being key for the Turkish audience.
According to crypto ownership data from Statista, 20% of the population owned or had owned a crypto in 2019, rising to 25% by 2021.
What’s interesting about the global data on cryptocurrency ownership is that it highlights how ownership is generally highest in countries facing similar constraints to Turkey. In other words, inflation is driving people toward bitcoin and other crypto as a way to preserve (or increase) the modest wealth they have.
As a result, Turkey has one of the fastest-growing crypto-markets in the world, even though the government has sought to restrict it in various ways in recent months (so far without success).
Even more recently, industry figures in Turkey suggest that the 2022 bear market hasn’t done too much to dampen Turks’ enthusiasm for crypto. Indeed, even as BTC has fallen 71 percent since an all-time high of USD 69,000 in November, the Turkish lira has fallen even harder.
“Trading volume is high in Turkey, demand is high as we seek to protect our money from high inflation and high interest rates. There are 5.5 to 6 million Turks who hold a crypto account in the country and if you include family members, it’s something that interests about 10 to 12 million people,” said consultant and author Vedat Guven, who was interviewed by German public television channel DW in May.