Cryptocurrencies have become progressively admired in nations like Venezuela, where the domestic economy is in turmoil and their currency has been besieged. Where the possibility of protecting themselves from devaluation or real value has been a concern, Bitcoin has now become a popular option and many perceive it as digital gold instead of a payment system. That is to say, many investors try to buy the cryptocurrency to protect the family’s assets.
In this sense, as the Turkish lira’s crisis intensifies, the crumbling economy of Turkey could also turn to bitcoin in its hour of need as the pioneer cryptocurrency’s prime objective is meant for an alternative solution to hyperinflation and a collapsing currency.
It’s the latest wrinkle in an international political tussle financially breaking a great many Turks in its wake. Consequently, the country’s fiat currency is down some 40% against the greenback, hyperinflation has gone out of control, and politicians are ramping up nationalism in an effort to avoid widespread calls for basic economic reform, raising interest rates, seeking International Monetary Fund assistance, among some alternatives. The lack of diplomatic agreement could bring about yet another round of US economic sanctions against Turkey.
Well, this seems to be a good time to recapitulate two developments late last week:
1) The CBT survey of inflation expectations was published on Friday: expectation for end-2018 inflation worsened notably from an already bad 13.9% to 16.5% in August; the market expects some moderation back to 13% levels by Q3 2019, but this level is hardly encouraging.
The market consensus, even before last week’s lira crisis, was for 18% inflation by this year-end; it will very likely have to be revised higher as the lira exchange rate shows no sign of heading back to its old range. The market’s GDP growth forecast for this year also fell by 0.5pp in August.
2) Turkey’s consumer confidence index dropped 4.8pts m/m in August and now looks similar to the business sentiment and PMI indicators, which declined sharply over the past couple of months.
Overall, the Turkish lira crisis is rapidly filtering through to inflation and economic sentiment, which opens the door for second-round impacts. The longer the problem persists, the larger this impact will be.
Eiland Glover, Founder and CEO of Kowala commented: “Interest rate manipulation by the central bank appears to be Turkey’s only option. But what about a future where in which governments lack much of the power to create such economic crises in the first place? We are witnessing the end to the nation-state’s monopoly on the creation of money.”
Amid the aforementioned crisis, an instantaneous asylum seems to be shifting Turkish lira into bitcoin (BTC), and a virtual stream of such developments on exchanges such as Local bitcoins are observed the recent past. Although the Turkish government has also seemed to have enticed the public to refrain from foreign currency (especially USD), locals seem to be quietly ditching theirs for cryptocurrency. The cryptocurrency is appreciated in Turkey by citizens.
All these factors are the driving forces for Turks to flinch at reported premiums of 25% to unload into BTC as lira has been conflicting with USD.
It is possible that the government of Turkey has in its plans the creation of a cryptocurrency backed by the government, following the steps that Venezuela is taking, the blockchain-bitcoin technology can help this nation to avoid hyperinflation of the economy, time will tell what direction the economy of this nation will take. It waits for new ads.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.