Bitcoin is growing in tandem with the Turkish lira, but not due to increased demand. The fall of the national currency is caused by low interest rates, dropping its value in relation to bitcoin, dollar and other currencies / assets.
On Thursday, the lira fell another 5.6% against the dollar, after the country’s central bank cut its policy rate by 100 basis points on the same day.
Since September, the currency has dropped by 47% against the dollar – in early September, the dollar was worth 8.29 lira, and currently the value of the dollar in lira exceeds 15.6.
President Tayyip Erdogan is pursuing an unusual and risky policy of sharply cutting interest rates in the face of rising prices across the country. Since September, cumulative easing has grown to 500 points with a projected discount rate of 13% at the beginning of 2022. In response, residents of the country began to sell their currency, which further exacerbated its decline.
While not on the same scale, the US has also experienced exceptionally high inflation this year. If, in response, Federal Reserve Chairman Jerome Powell plans to cut bond purchases, Erdogan decided to raise the minimum wage by 50% in 2022.
In addition, the Turkish President is prioritizing lending and exports to spur economic recovery.
Inflation is now at an alarmingly high level of 21%. Ipek Ozkardeskaya, senior analyst at Swissquote Bank, criticized Erdogan’s approach:
This is a bold move that will certainly cost Turkey a lot of money and headaches. The reaction is a big sale of the lyre.
Despite the fact that the main cryptocurrency is now showing a decline, recently it has reached a record level in relation to the lira – more than 799 thousand lira per coin.
Google trends data confirms the growing interest in cryptocurrencies in Turkey.
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