Bitcoin hits historic highs against Turkish lira

[ad_1]

The following is taken from a recent edition of Deep Dive, Bitcoin Magazine’s premium market newsletter. To be among the first to receive this and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

The Turkish lira is in free fall after President Erdogan asked the Central Bank of Turkey to cut rates for a third consecutive month from 19% to 15%. The Turkish lira against the US dollar has weakened over the past decade, but yesterday the currency decelerated rapidly, losing more than 10% of its value in one day, hitting an all-time low. It is a historic event for a G20 country.

Source: TradingView

Source: TradingView

What’s making the economic situation worse is that Turkey’s consumer price index has accelerated over the past two years, now well above its central bank rate at 19.89%. As domestic inflation rises, real rates will collapse, causing investment capital to flee for foreign investment. A collapsing currency will only accelerate this trend of inflation and negative real rates, as it is not clear how Turkey can stabilize its currency without a lack of foreign exchange reserves to lean on.

In addition, $ 13 billion in Turkey’s external debt is expected to fall due this month and next. Debt repayments increase demand for foreign currency, adding even more selling pressure to the Turkish lira.

Source: FRED

Source: Bloomberg

The president’s goal with the rate cut is to increase economic growth, reduce unemployment and boost exports. Yet it is the Turkish citizen who faces a severe decline in his purchasing power at an unprecedented rate during a period of soaring prices and political instability.

With the erosion of the currency’s value at this accelerating rate, bitcoin is reaching new all-time highs against the Turkish Lira. This year, it has proven to be the best performing store of value compared to US dollar and gold alternatives. Money will flee to assets that can maintain local purchasing power, and bitcoin offers the exact solution to the type of chaos that is unfolding. The bigger question now is, “How will the Turkish people react?”

[ad_2]