Bitcoin Pushes ATH Against Turkish Lira After Latest Erdogan Rate Cut

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Bitcoin is skyrocketing against the Turkish Lira – but not due to increased demand. On the contrary, low interest rates cause the national currency to fall rapidly, reducing its value against Bitcoin, dollar and other currencies / assets.

Turkish lira tumbles

As reported by Reuters, the lira fell another 5.6% against the dollar on Thursday. This followed a 100 basis point cut in the policy rate by the country’s central bank on the same day.

Since September, the currency has fallen 47% against the dollar. Worth 8.29 lire at the start of September, the dollar denominated value is now above 15.6.

President Tayyip Erdogan implemented an unusual and risky policy of steep interest rate cuts in the face of rising prices across the country. Its cumulative easing has risen to 500 points since September, with an expected policy rate of 13% for the start of 2022. In response, the Turks have sold their currency in response, further exacerbating its crash.

While not nearly on the same scale, the United States has also experienced exceptionally high inflation this year. While Federal Reserve Chairman Jerome Powell plans to cut bond purchases in response, Erdogan has instead chosen to increase the minimum wage by 50% in 2022. He still prioritizes loans and exports for stimulate economic recovery.

Inflation is now dangerously high at 21%. Ipek Ozkardeskaya – senior analyst at Swissquote Bank – criticizes Erdogan’s approach.

“It’s a bold move that will certainly cost Turkey a lot of money and headaches. The gut reaction is a massive sell to read it, ”she said.

Bitcoin’s solution

Bitcoin was created to address the soaring inflation that countries like Turkey are experiencing under fiat currencies. Its fixed supply of 21 million coins gives it immunity to monetary debasement, earning it the name “digital gold.”

Despite being more than 25% below its peak in dollar terms, the cryptocurrency has just hit an all-time high against the lira at over 799,000 lira per coin.

Google’s trend data reflected a growing interest in cryptocurrencies in Turkey this year.

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