The Turkish Lira has lost about 50% of its value in the last year, and about 30% of its value in the last 1 month. That means you could’ve bought 2 iPhones a year ago, but can only buy 1 today. It gets even worse when you look at a wider time frame.
Usually when a country messes up the economy, the central bank will try to stabilize the currency and contain the crisis, while taking massive losses, until they eventually run out of power and give in. This causes the value of their currency to start rapidly decreasing. This is happening to Turkey and the citizens are aware of it. Turkey has a history of having an economic crisis every decade and the older citizens remember converting all their paychecks into USD or gold as soon as they got them because of hyperinflation. This crisis was a bit overdue and a lot of economists were expecting it.
A lot of Turkish citizens just started to realize that Turkey has entered a “bear market”. No one wants to keep Turkish Lira, people are panicking and they want to exchange it for USD, or gold as soon as possible. If this bear market continues for another 6 months to a year Turkish citizens will convert most of their savings into other currencies.
However the local media are manipulating the numbers and giving false information about the economical situation of the country. Also it seems like some banks are not allowing the citizens to buy foreign currencies, though they allow them to sell foreign currencies. This trend might spread to other banks and eventually the citizens will only have gold as a safe place to store their wealth. While gold is an excellent long term store of wealth, it does pose some problems when the whole nation is trying to buy it: There isn’t enough gold for everyone, resulting in massive price increases in a small geographical area.
So, buying foreign currencies are discouraged by the governments and banks, there isn’t enough gold volume for everyone-how will the citizens of Turkey store their wealth?
The answer is digital gold: Bitcoin
It seems we are seeing the beginning of the Bitcoin trend: while most cryptocurrency exchanges have lost significant amount of volume after January, exchanges in Turkey have started to gain volume in the last few months. While the Turkish banks are displeasing customers, Turkish cryptocurrency exchanges are offering them a way out.
Let’s explore what might happen if this trend continues for a few quarters.
- Bitcoin 24h volume is $4B
- Ethereum 24h volume is $1.5B
- Turkey’s GDP per capita is $10.7K
- Turkey population is 80M
- Turkey internet users are 53M
Apparently 31% of South Korean workers have invested on average 3 months worth of salary into cryptocurrencies. While Koreans are fast adopters in technology, Turks are fast adopters in methods to transfer TRY into other currencies. Turks also have an entrepreneurial risk taking culture and are very interested in making easy money via ponzi schemes and other means. Furthermore Turks are HODLing about $200B worth of gold under their pillows. Keeping private keys under a pillow is the digitization of this tradition. There is also a research by INGBank that indicates 18% of young Turkish professionals own Bitcoin.
If 20% (10.6M) of those internet users in Turkey decided to put 3 months worth of salary into Bitcoin, that would mean $28.3B money entering the cryptocurrency market, slowly, consistently over time. At this time Bitcoin has a market cap of $111B and another $28B entering will increase the market cap by $100B-$500B. About 10% or $10B of Bitcoins are actively traded. If $25B were to enter into a $10B market, the price is likely to triple taking the market cap to around $350B. This happens because of the gap between inflow and market cap.
If Turkish people start using cryptocurrencies, the price of Bitcoin and every other cryptocurrency will increase significantly. This will result in technical analysts and trading algorithms getting bullish signals about the market and causing them to invest too. This will cause media all over the world to get interested in Bitcoin prices again, resulting in new people getting into it. Initial Coin Offerings, youtubers, bloggers, will have more money to spend on marketing and they will reach a lot more people.
This cycle of events could eventually lead to the biggest economic bubble humanity has ever experienced.
Or none these may happen because the Turkish government might start “discouraging” the purchase of cryptocurrencies too. Oh wait they already have:
Maybe we shouldn’t allow countries the luxury of screwing up their economies and then locking up their citizens money.
Social media gave us the freedom of communication, cryptocurrencies will give us financial freedom. Let’s embrace it.