Turkey’s local currency (the lira) has been through sharp swings throughout the past couple of weeks.
Rising inflation is also an issue, in addition to worries from institutional investors. In fact, Turkey’s government hasn’t made the situation easier, with regulations that seriously cripple the lira’s appeal.
One would be Turkish President Erdogan’s decision to cut interest rates, which has driven many hedge fund managers away.
So far, Turkey’s inflation rates have increased above 20% in 2021. The last quarter of 2021 saw the lira go from 9 to 18.5 per USD in just 6 weeks.
The lira would strengthen again to 10 per USD, only to fall back to 13.87 – making the currency extremely volatile.
But how does that relate to crypto? We’ll explain below…
Turkey is Exploring a “Central Bank” Digital Currency
Turkey is exploring the possibility of digitizing the lira into crypto, complementing the nation’s current payment infrastructure.
It’s not alone in this endeavor, however. Many major economies are developing this concept, including Australia, Brazil, and Sweden.
With that, Turkey’s research results should be announced in 2022 and are expected to be much farther ahead in that domain than other countries in its region.
Increased Crypto Use in Turkey – Is it a Safer Alternative?
It’s estimated that Bitcoin and crypto use, in general, has increased by 11 times in Turkey.
With that, institutional investors and professionals are shifting from the lira to crypto. This seems to be an odd move, especially with crypto being as volatile (if not more) than the lira.
In fact, the crypto market experienced a sharp crash in 2022’s first week.
The main reason for the crash seems to be the US Federal Reserve’s December meeting, which implied that interest rates would go up earlier than expected.
This caused a worldwide sell-off in global stocks which caught up with the crypto market.
Another reason is the current Kazakhstan riot. Internet services went down after the riot. With it being the world’s second-biggest Bitcoin mining spot, this put 13% of Bitcoin’s mining activity on hold.
And a third reason is the rise of Omicron, which has had devastating effects that stacked with the previous waves throughout the past 2 years.
In fact, Omicron has rendered millions sick, overloading healthcare systems that were already pressured prior.
How Can Turkey Transition to Crypto Safely?
Cryptocurrencies aren’t a bad option, assuming an eco-friendly solution is available.
Oddly enough, one of the world’s pioneers in Blockchain and crypto technology is Turkish. That would be Emin Gun Sirer is a Cornell University professor and Ava Labs CEO.
He has been credited for designing “Karma” back in 2003, the first cryptocurrency prototype, and a proof-of-work system that precedes Bitcoin.
His current project is “Avalanche,” a blockchain system that’s eco-friendly, and able to handle high transaction amounts in short timeframes.
Avalanche focuses on reducing communication time between validating nodes, reducing stress on power and hardware needed to maintain the monetary value on the network.
Essentially, being a sustainable cryptocurrency – this may be what governments like Turkey seek if they’re legalizing crypto as tenure.