Turkey Experiences Bitcoin Craze Amid Economic Turmoil | business | Economic and financial news from a German perspective | DW

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Turkey witnessed an unusual coin toss in the recent Istanbul football derby between Besiktas and Fenerbahce. To decide which team starts on which side, referee Arda Kardesler apparently tossed a coin with the logo of the cryptocurrency Bitcoin, surprising millions. The Turkish Football Federation (TFF) launched an investigation.

The incident was just one example of the growing frenzy surrounding a new investment opportunity. The country is among the top users of cryptocurrencies.

Turkish TV channels and billboards are full of advertisements for crypto platforms, urging Turks to open accounts and trade – and promising customers get-rich-quick schemes.

Lira meltdown

In an environment where the national currency is depreciating almost daily, some Turks have turned to cryptocurrency investments to protect their savings from devaluation.

The Turkish lira has lost half its value over the past 12 months, while annual inflation hit a 20-year high of nearly 70% in April.

“The trading volume [in the cryptocurrency market] in Turkey is high, the demand is high. because we want to protect our money from high inflation and high interest rates,” Vedat Guven, a consultant who co-authored the book Blockchain, Cryptocurrencies, Bitcoin – Satoshi is Changing the World, told DW.

Previous generations of Turks tried to avoid inflation by investing in more stable assets such as gold and real estate. Now the current generation has a popular alternative.

“There are 5.5 to 6 million Turks who hold cryptocurrency accounts in the country, and if you include family members, it interests about 10 to 12 million people,” Guven said. “Unfortunately, the ‘let’s get rich quick’ mentality with no learning and no effort is more prevalent here than in the rest of the world.”

While the state is trying to halt the lira’s plunge by making a new decision to limit access to foreign exchange resources almost every day, it has so far failed to reverse the plunge.

“Confidence in the Turkish lira could not be built despite best efforts,” said Burcak Unsal, a lawyer at Istanbul-based law firm Unsal, which specializes in cryptocurrency and blockchain transactions.

“Real estate and foreign currency investments and the like are expensive and unreliable, there are taxes and commissions.”

In contrast, students and retirees can invest in crypto with very modest amounts — even if they don’t have a credit card, they can still invest in cryptocurrencies,” he added.

Too little too late?

But there are concerns about the market segment after the founder of cryptocurrency platform Thodex shut down his website and reportedly fled the country with up to $2 billion in investor wealth last year. New legislation is overdue after the Central Bank of Turkey (CBRT) decided last year to ban the use of cryptocurrencies in payments for goods and services. The question of how cryptocurrency transactions will be taxed also remains to be clarified.

“There are not enough laws on this issue in Turkey so far, that’s a problem,” Unsal said.

“Turkey is definitely too late – a healthy and reliable sector should be created without further delay, based on precise and comprehensive legislation,” he said.

The CBRT’s sudden ban on using cryptoassets for payments has raised questions about what exactly the Turkish authorities are doing with cryptocurrencies.

“When you ban cryptocurrency payments, you ban blockchain projects, and that is very wrong. We are handicapping ourselves,” said cryptocurrency expert Guven.

Blockchain is the digital public ledger where Bitcoin transactions are processed and recorded. The technology was invented to host Bitcoin and today forms the basis for many other cryptocurrencies.

Cryptocurrency exchanges are springing up like mushrooms

The daily trading volume of Turkey’s first cryptocurrency platform, BtcTurk, was around $424.3 million last week, according to CoinGecko data, while another local Turkish platform, Paribu, had a trading volume of $203.5 million.

About 40 cryptocurrency exchanges operate in Turkey.

“Exchanges are mushrooming, including FX entering the Turkish market,” Unsal said.

“The volume they create, the direct investments they bring in and their expertise is truly incredible,” he remarked.

Another sign of unpredictable volatility is that cryptocurrencies took a nosedive last week.

Bitcoin, the largest cryptocurrency by total market value, fell to its lowest level in 16 months last Thursday.

Edited by: Hardy Graupner

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