Over the past few weeks, the Turkish Lira has begun a freefall, largely due to “an explosive mix of factors including an already frail US$900 billion (S$1.2 trillion) Turkish economy, record high inflation, misguided domestic policies, US interest rate hikes - which encourages investors to pull money out of emerging markets - and the escalation of a political spat with the US,” according to The Straits Times.
The deflation of the Lira pressures an already vulnerable Turkey into decision making that has some impacts on short-term volatility, but virtually no impact on long-term stability and its’ consequences. This includes a boycott of US electronics to the benefit of Turkey’s Vestel and moves to limit liquidity within Turkey.
This freefall parallels the Lira deflation of the late 1980s, however, this time the average Turk is faced with a wider range of opportunities than converting Lira to hard assets or simply seeing their savings erode.
Livecoinwatch, a crypto news source, reports that Turkish exchange activity is up 350 percent in the last few weeks — indicating that Turks are moving their Lira into discount-priced crypto assets, that themselves have seen market turbulence this summer.
Purchases by Turks are largely Bitcoin, Ethereum, and EOS — all widely adopted cryptocurrencies that can be used for at least 75 percent of what we buy online every day.
These moves are both a rebuke of Erdogan’s ask of Turks to convert their dollar assets into Lira, earlier in the year, as well as a forecast of things to come.
A full scale deflation of the Lira would put Turkey in a rather vulnerable position with Russia, not to mention the military challenges they currently face in Syria. Further, a Lira crash could push Turks to rather quickly adopt cryptocurrencies, in the face of a Lira that would be valueless.
In all of these scenarios, the opportunity for cryptocurrencies to become a true alt-currency exists, as well as the challenges that only semi-traceable crypto would bring to an already volatile region.
Oz Sultan is a leading Big Data and counterterrorism expert who focuses on anti-recruiting and ISIS counterterror (CT) research within social media. He also advises a number of Fortune 1000 companies and is Adjunct Faculty at City University of New York (CUNY) Baruch. To read more of his reports — Click Here Now.
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