The Turkish lira slipped against Bitcoin, hovering around a two-month low after data showed annual inflation skyrocketed in February. The lira has lost about 12% against the world’s largest cryptocurrency this week, data from Coingecko shows.
The lira, currently trading at about 590,462 to Bitcoin, also lost about 7% to the dollar over the past week. Inflation accelerated at a record-high 54% in February, data from Tradingeconomics showed, while weekly volumes on BtcTurk, one of Turkey’s largest crypto exchanges, exceeded $2 billion.
Turkish inflation has skyrocketed since last year, largely due to President Tayyip Erdogan’s unorthodox stance on monetary policy, which saw the central bank cut interest rates despite rising prices. Surging inflation has played a key role in undermining Turkish financial stability, and has pushed its populace into guarding their wealth through crypto.
Rising inflation fuels crypto adoption
Last year, during a currency crisis that saw the lira plummet in value, trading on major Turkish exchanges had exceeded 1 million daily trades. That trend appears to have spilled over into this year, according to a report from The Financial Times.
While the use of crypto for payments is banned in Turkey, it is legal to invest in the space as a tradeable asset. Surging popularity of digital assets, coupled with a crash in a major exchange last year has also seen the government race to draft laws covering crypto. A recent report from blockchain research firm Chainalysis also showed the Turkey had the highest crypto transaction volumes in the Middle East.
Countries with high inflation and a weak currency have seen a surge in crypto adoption in recent years. Venezuela had turned to crypto, specifically Bitcoin and the country’s own token, Petro, after the bolivar crashed and the economy tanked in 2019. Chainalysis’ report also showed that emerging markets- countries that tend to face economic instability, were the biggest adopters of crypto in 2021, with Vietnam in the lead.