Turks Pile Into Bitcoin and Tether to Escape Plunging Lira

Turks are particularly obsessed with stablecoin tethers whose value is fixed at the dollar. According to data provider CryptoCompare, this fall, Lira became the most traded government-issued currency against Tether, surpassing the dollar and euro.

The Turks have long overcome the spell of economic turmoil by keeping money in US dollars, euros, or gold. The rise of cryptocurrencies in recent years, though much more volatile, offers a new group of means for storing wealth. Since September, Lira has lost 40% of its value against the dollar. Bitcoin initially surged almost 40% against the dollar by early November, but is now down more than 10%.

In Istanbul, Turkey’s largest city and commercial center, cryptocurrency exchange ads appear on trams, billboards, and one of two airports in the city. The Grand Bazaar is lined with shops selling Bitcoin, hiding in alleys near where traders sell foreign currency and gold.

President Recep Tayyip Erdogan confused Turkey’s financial system last fall, calling for repeated interest rate cuts in the face of rising inflation. The currency has stabilized somewhat in recent weeks after the government’s bailout of savers, but local Turks are still wary.

“Meaningless policies on interest rates, diminished confidence in published statistics on inflation and political decisions … Cryptography has become a secure haven, despite being a fairly dangerous and volatile financial asset. “Kağan Şenay, a 27-year-old trader in Brusa, said. Northwestern Turkey.

Sheney said he started trading Bitcoin in 2017 to make more money. Increasingly, he sees it as a way to protect his lira income from inflation. The purchasing power of Lira, which he gained from his work as a dough producer, declined as prices rose.

Turkey has adopted cryptocurrencies, even though its use as a domestic payment method was officially banned last year. The ban, revealed without warning, “created a traumatic experience for the Turkish crypto community,” said Turan Sart, an adviser to the Turkish crypto exchange Parisb. The government has promised that the new cryptocurrency law will be sent to parliament soon, but Mr. Sart says there are few details about its implications.

Cryptocurrencies are becoming more popular in some developing countries where there is a high distrust of Turkey and the government’s economic policies. Nigerians use Bitcoin for payments after devaluation of currencies and strict control of access to foreign currencies. El Salvador became the first country to recognize Bitcoin as fiat currency last year, 20 years after the economy tied to the US dollar.

In Turkey, some of the distrust goes beyond the lira. Two-thirds of Turkey’s bank deposits are in foreign currencies, mainly the dollar and the euro. Turkish banks lent some of those dollars to the central bank and the government, which used them to intervene in the foreign exchange market in a failed battle to support Lira.

If the withdrawal of dollars was in a hurry, Turkish banks would need to regain some of those dollars to meet the needs of depositors, and the question is whether the government can raise dollars. In the worst-case scenario, some fear that the government could force banks to convert dollar deposits into lira.

According to some Turkish savers, it is the exchange of dollars and cash dollars held by banks for what is known as cryptocurrencies whose value is fixed in traditional currencies such as stable coins and dollars. We are promoting. More than half of December’s transactions with Lira are related to tether, according to Chainalysis.

Stablecoins such as tethers are also used as gateways for trading in and out positions of more volatile coins such as Bitcoin and Ether. Turkey’s cryptocurrency exchange Bitlo saw a surge in the number of new traders in the last quarter as the value of Lira soared, said Esra Alpay, chief marketing officer of the company.

“The rise in Turkish lira volatility and inflation seen in recent months has led investors to see cryptocurrencies as a profitable investment in the long run and a hedge against inflation in the short run.” She said.

Ege Tuluay, a 24-year-old student trained to become a sailor, visited Caspicoin, a cryptocurrency store in the Grand Bazaar, on Monday to see fees for buying tethers with US dollar savings. .. He plans to use tether to buy other cryptocurrencies.

“Cryptocurrencies are broken and give hope to the Turkish people and they want to make money. It seems like easy money for the Turks.”

Write to Caitlin Ostroff at Caitlin.ostroff@wsj.com and Jared Malsin at jared.malsin@wsj.com.