Bitcoin Soars Against The Turkish Lira After Erdogan’s Rates Cut

Bitcoin soars against the Turkish Lira and its store-of-value role remains critical in Turkey right now as the inflation in the country is spiraling out of control so let’s take a closer look at today’s Bitcoin news.

Bitcoin soars against the Turkish Lira but not because of the increase in demand. The low-interest rates are causing the nation’s currency to drop fast and this lowers the value against Bitcoin, USD, and other currencies.

The Lira dropped by another 5.6% against the dollar and this followed a 100 basis point policy rate cut from the nation’s central bank on the very same day. The currency fell by 47% against the dollar, in September the Lira was worth 8.29 and the dollar’s Lira denominated value now stands at 15.6. President Erdogan implements a very risky policy of heavy interest rate cuts in the face of the rising prices in the country. The easing increased to 500 points since September with a forecasted policy rate of 13% at the start of 2020. People in Turkey have been selling out their currency as a response which further enhanced its crash.

Though not being nearly at the same scale, the US experienced high inflation this year while Federal Reserve Chairman Jerome Powell plans to cut the bond purchases in response. Erdogan on the other hand chose to raise the minimum wage by 50% in 2022 but he still prioritizes lending and exports to stimulate the recovery of the economy. The Inflation sits high at 21% and many analysts criticized his approach:

“It is a bold move that will certainly cost Turkey a lot of money, and headache. The knee-jerk reaction is a heavy selloff in the lira.”

Bitcoin was created as a fix for the rampant inflation in nations like Turkey. Its fixed supply of 21 million coins provides immunity to monetary debasement which is why it is called digital gold. Despite being over 25% under the peak in dollar terms, the cryptocurrency tapped an all-time high against the lira. The Google trends data reflected an increasign interest in crypto in the country this year alone.

Bitcoin’s price started a recovery wave to $48,500 and Ethereum surged above $4000. However, SOL gained 10% and broke the $175 level. BTC formed a base near the $47,200 zone starting a recovery wave and climbing above the $48,500 zone on the news from the Federal Reserve. Right now it is facing some strong resistance near the $49,500 zone as the bulls are looking for a break above $50,000. Both BTC and ETH faced strong resistance.