Fri. Jan 21st, 2022

The Turkish lira – Turkey’s national currency – has been in free fall for the past three months, losing about 35% of its value against the US dollar. This has been the result of the president’s somewhat controversial policies and decisions, the most recent of which led to a daily decline of 15% against the USD.

In September, President Recep Erdogan also declared war on bitcoin with the aim of paving the way for the implementation of the digital lira. Since then, Turkey has suffered significant economic setbacks, while the primary cryptocurrency has increased its price by almost 40%. As such, MicroStrategy’s Michael Saylor advised locals to convert their fiat currencies to bitcoin to save themselves in the monetary chaos that reigns within their country’s borders.

Turkey’s financial crisis is worsening

The financial situation in Turkey is worrying to say the least, and its main problems come from the collapse of the Turkish lira. On November 23, it dipped to a historically low level of 13.44 against the dollar. This was a decrease of 15% for a single day.

The sharp decline has caused inflation, which is currently around 20%. Basic goods and services for Turks (a population of about 85 million) have risen in price, while their wages in local currency have been severely devalued.

The COVID-19 pandemic and the controversial policies pursued by some governments also caused rising inflation. The mass printing of the US dollar has e.g. increased the rate in the states to almost 6%. Yet the situation in Turkey seems far worse.

Having a national currency that loses its value on a daily basis can mean that the state will have further difficulties in fighting the mass pandemic and recovering its economy.

When we talk about coronavirus, it is worth noting that the country is one of the worst affected by a series of new cases and registered deaths. So far, more than 75,000 people have lost their lives, while nearly 30,000 new cases daily.

The economic and health crisis in the state is so severe that the technology giant – Apple – has temporarily suspended online sales of its devices within Turkey’s borders. It is still unclear when the company will restore these services.

Erdogan’s controversial laws

Many believe that President Erdogan and his controversial orders fueled this financial anarchy. Tim Ash – Senior Emerging Markets Strategist at Bluebay Asset Management – is among them:

“Water-sick where the lira is, but it’s a reflection of the insane monetary policy framework under which Turkey is currently operating.”

The aforementioned 15% drop in the lira against the dollar came after President Erdogan doubled his policy of lowering interest rates to win his “economic war of independence”. These aggressive cycles aim to increase exports, investment in the region and jobs. So far, however, there has been little to no success, and Erdogan’s actions have received massive backlash from opposing parties.

President Erdogan. Source: Yahoo

Turkey and Bitcoin

It was in April 2021 that the local government banned cryptocurrency investors from using their holdings for payments. The authorities also allowed them to use digital assets “directly or indirectly in the provision of payment services and the issuance of electronic money.”

Instead of pushing locals away from cryptocurrencies, the restrictions had the opposite effect, and Bitcoin Google searches in the country hit a record high.

In September, President Erdogan fired another shot at the digital assets industry by declaring war on BTC. True to his authoritarian rule, he wanted to pave the way for a digital central bank currency that would be under full control of the government.

“We are in a war against Bitcoin,” he said at the time. “Because we want to continue on the path with our money, which is our basic identity in this matter.”

Similar to what happened in April, people’s interest in bitcoin and the alternative currencies increased, while the Turkish lira went on a downward trend against the dollar and other national currencies. At the same time, bitcoin soared to a record high level, and although it has declined slightly since then, it is still well ahead of the dollar, while the lira is not.

Embrace BTC if you want to ‘thrive’

Turkey and its local currency may be in a knockdown state, but bitcoin may help residents get back on their feet. That’s what Michael Saylor – MicroStrategy’s CEO and a prominent BTC bull – thought recently.

This is not the first time Saylor has aired his thoughts on a macroeconomic level. Not long ago, he praised El Salvador’s decision to accept bitcoin as a legal tender.

Saylor certainly knows a thing or two about converting a significant portion of his capital (or his company) to bitcoin. His personal BTC holdings and MicroStrategy’s holdings are currently worth more than $ 5 billion.

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By Victor

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