In Turkey, inflation has officially gone out of control: the annual rate of production of new monetary mass has even reached 72%, leading citizens to increasingly consider Bitcoin and crypto as an alternative solution to the Turkish Lira.
The situation in the Middle Eastern country seems to be getting closer and closer to that of Argentina, where triple-digit inflation has made the Argentine Peso completely unusable.
In these cases Bitcoin and cryptocurrency no longer represent mere speculative tools, but rather a solution against the devaluation of fiat currencies.
All the details below.
Summary
Annual inflation at 72% in Turkey: payments in Bitcoin and crypto are increasing
After Argentina, it’s Turkey’s turn: inflation has reached such a high level that it has made the state currency practically unusable, thus encouraging the alternative use of Bitcoin and crypto as means of payment for exchanges between individuals.
The annual devaluation rate of the Turkish Lira (TL) has more than doubled since June 2023, going from around 30% to the insane figure of 72%.
It is not the first time that inflation in Turkey reaches similar levels: already in October 2022 the percentage of new money production had jumped to 130%/yr, but then dropped drastically leaving room for the growth of local speculative markets.
Now the situation seems to be officially out of control: the Turkish Lira is at its “all-time low” against the US dollar and yields on government bonds have risen to 50%.
To better understand how serious the situation is, just think that about 11 years ago the equivalent of 1 USD was represented by just 2 TL, while now it has an equivalent of over 32 TL.
In such a scenario, exacerbated according to the testimonies on X from the professor of applied economics Steve Hanke by the inability of the government Fatih Karahan to manage the internal monetary mass, Bitcoin and crypto are no longer an option.
Although digital currencies are barely seen as a speculative game in the most developed countries where inflation does not erode investors’ savings, in places like Argentina or Turkey their use can really make a difference.
Bitcoin represents the ultimate safe haven after gold and can help Turkish families preserve their capital in the long term, despite having to endure market volatility in the short term.
On the other hand, crypto alternatives such as stablecoin, allow exposure to the dollar using a tool not controlled by a central authority and therefore not banable (as it happened in Argentina where the use of the dollar was limited).
The non-conformist nature of Bitcoin and cryptocurrencies is most appreciated in countries with weak currency
The growth of Bitcoin and cryptocurrencies adoption in Turkey following the sudden increase in inflation once again testifies how these tools are more appreciated in those countries where a strong central currency is lacking and is not excessively devalued over the years.
According to a study by Chainalysis dated September 2023, the top 3 countries where Bitcoin is most popular and used daily for exchanges are India, Nigeria, and Vietnam.
Note how in all 3 countries inflation in the last decade has reached completely unacceptable levels, losing much of their value against the dollar benchmark.
Throughout the Eurozone, there is not a large concentration of use of alternative digital currencies, although there is a strong presence of web3 developers in some cities like Berlin, Paris, and Lisbon.
In the United States, the use of cryptocurrencies is on the rise but is not correlated with a weak dollar but rather is based on greater public recognition and an increase in investments in the sector.
Regarding the production of new supply, we remind you that in a few days there will be Bitcoin’s halving: finally after 4 years the most anticipated event by bitcoiners will return, which will see the production of new BTC halved as a block reward, with the issuance going from 6.25 coins to 3.125 every approximately 10 minutes.
This does not make Bitcoin deflationary, as erroneously described, but elevates it to a safe haven asset with a constant and decreasing issuance, making it increasingly expensive in a scenario of rising demand.
Even Ethereum is performing very well in this regard, having recorded a neutral net issuance of new ETH since August 2021, ever since the burn mechanism was implemented after EIP-1559.
Although many ETH are produced every day and distributed to the validators who contribute to keeping the network active, many others are burned during transactions, making the second largest cryptocurrency by market capitalization an alternative asset against fiat currency inflation.
