As Turkey’s economic woes continue to deteriorate with lira spiraling downwards, investors are turning to cryptocurrency as a safe haven.
Local demand for Tether, the largest dollar-backed stablecoin, surged in early May ahead of the election and has remained high since, according to a recent report from Bloomberg.
Tether’s share of trading volumes on one of the biggest Turkish crypto exchanges, BTCTurk, stands at 20% compared to 1% on Binance, highlighting how strong the demand for stablecoin in Turkish markets is and its immense popularity as a way of protecting capital.
Turkey’s President Erdogan is known for his unorthodox economic policies since the last election in 2018, including attempts to cut interest rates to temper inflation as high as 80% and ignoring standard monetary practices.
This has led to the lira dropping by 80% in value, causing concern among its citizens as its buying power continues to plummet.
While regulations have made it difficult to buy dollars or gold with the lira, investors have hijacked a window of opportunities provided by cryptocurrencies such as Tether.
“Investing in stablecoins allows people to keep the value of their wealth, it’s one of the ways to hold on to some value when inflation is this high. This is the only motivation for people to buy stablecoins right now,” Istanbul-based university lecturer and former banker, Ebru Güven, said.
A large number of investors share similar views, as the current financial situation in Turkey has made stablecoins an increasingly attractive prospect.
Batuhan Basoglu, a 28-year-old graphic designer, told Bloomberg that he traded his savings to Tether and other cryptocurrencies following the election, expressing uncertainty surrounding the lira’s future.
Rather than converting his Tether tokens back into lira, Basoglu has decided to double down on the stablecoin, demonstrating a potential lack of faith in Turkey’s existing financial infrastructure.
Turkey Has the Highest Ownership Rate of Crypto
In Turkey, a country hit hard by soaring prices and tumbling currencies, people are increasingly turning to stablecoins to protect their wealth.
According to research from GWI, Turkey has the highest ownership rate of digital currencies worldwide, at 27.1%.
The shift toward digital tokens comes as residents of these countries might have difficulty getting their hands on physical dollars or other currencies amid tight capital controls.
Stablecoins, such as USD Coin (USDC) and Tether (USDT), have been an attractive alternative to scarce dollars for citizens of Turkey.
Stablecoins are digital assets that maintain a peg to traditional assets such as the U.S. dollar or gold, providing stability compared to other cryptocurrencies.
“Folks, whether they’re on the retail side or institutional side, are thinking about how can we hedge against currency devaluation,” Ehab Zaghloul, a research scientist at Tribal Credit, a digital payments platform for startups in emerging markets, told Reuters in May.
“They want to potentially hold additional assets pegged to a stronger currency, so, things like USDC or USDT or anything pegged to a stronger currency like the U.S. dollar.”
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