Citizens in Turkey are turning to cryptos as a refuge against the collapsing lira, Bloomberg reports.
Local demand for Tether, surged in early May ahead of elections and remained high after President Recep Tayyip Erdogan’s victory rattled markets.
Although the cryptocurrency market has been under pressure in recent days, the lira fared even worse, falling to an all-time low – Bloomberg reports.
The Turkish currency fell 11% against the dollar last week as the central bank has pulled back from intervening to support it after the election.
Since the last election in 2018, the lira has lost 80% of its value as Erdogan pursued unorthodox economic policies, including attempts to tame inflation by up to 80% with… interest rate cuts.
In this environment, cryptocurrencies like stablecoins are seen as increasingly attractive because these tokens are intended to maintain a stable link to the US dollar.
Pound transactions accounted for 10% of total cryptocurrency trading volume in early June, a $1.1 trillion-a-day market, after previously reaching 18% in May, according to Kaiko data. That compares with 4% in early 2023, the data provider said.
Ebru Güven, an Istanbul-based university lecturer and former banker, said regulations have made it difficult to buy dollars or gold with the lira.
“Investing in stablecoins allows people to maintain the value of their wealth, it is one of the ways to maintain some value when inflation is so high,” Güven said. “That’s the only incentive for people to buy stablecoin right now.”
Tether’s share of transaction volumes on BTCTurk, one of the largest exchanges, stands at 20% compared to 1% on Binance, according to data from CoinMarketCap, signaling that demand for stablecoin in Turkish markets is strong.
Batuhan Basoglu, a 28-year-old graphic designer, trades cryptocurrencies on Binance and puts all his savings into stablecoins and other cryptocurrencies.
“Just before the election, I felt the urge to convert my Turkish lira into US dollars because of the uncertainty surrounding the future of the currency. To protect myself from this risk, I bought Tether,” Basoglu said.
And as the lira slipped further, instead of converting Tether back into pounds, Basoglu went all in on the stablecoin.
“It is noteworthy that despite historically low volumes, demand for stablecoins in Turkish markets remained strong,” Dessislava Aubert, an analyst at Kaiko, said in an email.
Tether’s share of trading volumes in local markets reached its highest level since 2020 in May, she added.
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