Things haven’t improved in 2022 as the lira has suffered since Russia invaded Ukraine as sanctions and export bans have resulted in soaring commodity prices.
The central bank estimates that inflation will only be 23.2% YoY by year-end, but that estimation was made assuming the price of crude oil would be around $80 per barrel.
To put it simply, since 2012, Turkey has suffered from taking on a large debt burden coming out of the Great Recession, political instability that led to a failed coup d’état in 2016 and U.S.
All of these events have culminated in what is unfolding today with the collapsing lira.
The Central Bank of the Republic of Turkey and President Tayyip Erdoğan appear desperate in their efforts to try to combat soaring inflation and stabilize the lira.
One example of this price fixing is with bread and Turkish bakeries.
This means that since November 2021, approximately 75% of the central bank’s FX reserves had been sold off to support the lira.
To ease public discontent, President Erdoğan increased the minimum wage by 50%, the highest raise in the 50 years.
To combat investors hoarding dollars to protect themselves, the Central Bank of Turkey announced that they would support accounts that converted foreign currencies to liras.
President Erdoğan fired four central bank policymakers in a two-month span back in the spring of 2021 alone.
Despite all of these efforts by Turkish authorities, inflation continues to soar and the lira continues to lose its purchasing power.
All in all, this Turkish inflation train doesn’t appear to be stopping anytime soon.
Turkey dwarfs those other countries in gross domestic production , population and global trade.
Today, Turkey has a population of around 84 million people.
Recently, Turkey’s exports broke a record of over $225 billion dollars, and Turkey’s share in global exports surpassed 1% of total exports for the first time in history.
The point I’m trying to make here is that Turkey is not some small, inconsequential country.
The rapid inflation of the lira is, therefore, one of the biggest opportunities yet for Bitcoin to prove its use case on the world stage as a censorship-resistant money that no one can debase – money that can find product-market fit specifically in countries like Turkey where the local currency is losing its purchasing power at an alarming rate.
From speaking with some friends and colleagues on the ground, it sounds like what you’d expect to hear in the early stages of a hyperinflationary event.
The rising cost of living has made everything more expensive for the ordinary Turkish person.
Bread lines are becoming a more common occurrence, as The New York Times reports shows in this article.At the start of the year, the state raised electricity and natural gas tariffs that some estimate could raise household energy costs by up to 130%.
Foreigners from neighboring countries like Bulgaria have been crossing the border to take advantage of the lira’s struggles by using their stronger currencies to clear out grocery stores.
When people’s life savings are destroyed and they are finding it harder to afford necessities, the only thing left to do is take to the streets and demand change.
Much to the dismay of President Erdoğan, the people of Turkey did not heed his call to sell all of their gold and dollar holdings to protect the falling lira.
This increasing dollarization in Turkey shouldn’t surprise anyone because dollars offer short-term stability for these individuals to pay their bills each month amidst the rising inflation.
Over the last couple of years, we’ve seen a gold rush occurring as Turks saw the writing on the wall with their inflating lira and sought refuge in gold.
Since 2020, Turkish firms and retail investors have more than tripled their gold holdings to $36 billion.
The rush to gold and dollars is to be expected, and lately, we’ve seen gold prices continue to spike in the Turkish market.
A report from the Wall Street Journal found that the dollar value of cryptocurrency trading volumes is up, and so too are online searches for “bitcoin.” Turks are beginning to embrace bitcoin and stablecoins, such as tether, as hedges against inflation in their time of need.
The fall of the Turkish lira is a prime example of why, 13 years ago, Satoshi invented Bitcoin.
Before bitcoin, the people of Turkey would have had to resort to only using gold and dollars to protect themselves against their central bankers and government policies.
On top of that, unlike gold and the dollar, bitcoin cannot be easily seized by authorities as we’ve seen countries do in the past during periods of financial crises.
Bitcoin also has the added benefit of appreciating in value over time due to its inelastic supply and its network effect.
As the lira has inflated, the good news is the people of Turkey understood how to protect themselves in part because older generations have suffered inflation like this before in the late 1990s.
After El Salvador President Nayib Bukelye visited with the Turkish President back in January, President Erdoğan advised the country’s ruling Justice and Development Party to closely examine bitcoin’s potential use and to organize an upcoming forum on the subject.
It’s stories like the ones above that remind me of why I’ve dedicated every day of my life to making bitcoin more accessible to people all over the world suffering similar fates to those of the people of Turkey.