The Turkish Lira’s Freefall And The Bitcoin Parachute

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AssessmentAs the national currency of Turkey continues to plummet, Bitcoin represents an escape hatch for citizens looking to preserve wealth…

2021 was a rough year for the people of Turkey, as the country experienced rapid devaluation of its currency, the lira. 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. According to official government reports, Turks are now suffering from 54.4% year-over-year (YoY) inflation, the highest in 20 years.

Third Seal: Scarcity on Earth

“When He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand.” Rev. 6:5

Annual Turkey Inflation Rate

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. The outbreak of war has caused the price of oil to spike well above $100 at the time of writing. Soaring commodity prices from the war likely mean the central bank is underestimating year-end inflation. To put things into perspective, Russia and Ukraine supplied 80% of Turkey’s $4 billion grain imports last year. If the price of that one single commodity increases drastically, that alone could cause Turkey’s inflation rate to rise.

The purchasing power of the lira is tragically vanishing right before Turkish citizens’ eyes. But the truth is, this currency crisis has been developing for a long time now.

Over the last five years, the lira has lost 75.57% of its value against the U.S. dollar.

How Did Turkey Get Here?

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. sanctions and tariffs on its steel and aluminum industries further damaged its economy.

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