As Turkey grapples with soaring inflation and limited access to the US dollar, its citizens are increasingly turning to stablecoins for financial stability. The Turkish lira recently experienced a significant decline against the greenback following the suspension of intervention by the country's central bank after the recent presidential election, highlighting the urgency of seeking alternative assets.
Despite the global crackdown on cryptocurrencies, demand for tether (USDT) in Turkey has been surging since early May, according to a report by Bloomberg. While major cryptocurrencies are also witnessing a decline in prices, the lira has fared even worse, exacerbating the appeal of stablecoins.
Over the past week, the national fiat has plummeted by 11% against the US dollar after the central bank withdrew its intervention efforts following the re-election of President Recep Tayyip Erdogan. This prompted Turkish state banks to resume their support on Wednesday, aiming to stabilize the currency after its sharpest slide in over a year.
The Turkish lira's depreciation paints a bleak picture, having lost 80% of its value since the previous election in 2018, and an additional 20% against the dollar in 2023 alone. Faced with such challenges, many Turks have sought refuge in crypto assets, particularly stablecoins like tether. Data from Kaiko reveals that lira transactions peaked at 18% in May and accounted for 10% of total crypto trading volumes in early June.
Ebru Güven, a former banker and university lecturer, explained the rationale behind this shift: "Investing in stablecoins allows people to preserve the value of their wealth. It's one of the ways to retain some value in times of high inflation." However, Güven also noted the difficulties imposed by regulations, making it increasingly challenging to acquire dollars or gold as an alternative.
The report highlights that tether's dominance is particularly notable on Btcturk, a prominent Turkish crypto exchange, where the stablecoin accounts for 20% of the trading volumes. In contrast, it represents only 1% of the trading volumes on Binance, the world's largest digital asset exchange by trading volume, according to Coinmarketcap data.
Dessislava Aubert, an analyst at Kaiko, remarked on the robust demand for stablecoins in Turkish markets, stating, "It's noticeable that despite historically low volumes, demand for stablecoins on Turkish markets has remained strong." In fact, last month, tether's share of trading volumes on local markets reached its highest level since 2020, underscoring the significance of stablecoins in the Turkish financial landscape.
Amid the economic uncertainties plaguing the country, it seems that Turks are increasingly relying on stablecoins like tether to navigate the volatile financial climate. While regulatory obstacles persist and traditional safe-haven assets become less accessible, the allure of stablecoins as a store of value continues to grow, providing a glimmer of stability for individuals seeking to preserve their wealth in the face of inflationary pressures.
