Can Bitcoin save the day?

In Turkey, rising inflation reached 68.5% in March, a surge that pushed bitcoin to an all-time high against the Turkish lira.

The latest data released by the Turkish Statistical Institute highlights a monthly inflation rate of 3.16 percent.

Amid high inflation, Turkish citizens resort to crypto

Key sectors such as education, communication and hospitality led inflation with monthly increases of 13%, 5.6% and 3.9% respectively. The education and hospitality sectors recorded the highest annual inflation of 104% and 95% respectively.

As a result, Turkey's central bank has sharply raised interest rates, currently at 50%, to tackle inflation above the desired single-digit target.

Read more: How to protect yourself from inflation using cryptocurrency

Moreover, a significant adjustment to the minimum wage at the beginning of 2024 has exacerbated inflation. This policy doubled the minimum wage from the previous year, leading to a complicated economic situation.

While it was a little easier in March, tighter monetary and fiscal policies are necessary for stability, according to Nicholas Farr from Capital Economists.

“The latest inflation figures do little to change our view that further monetary tightening is in store and that a more concerted effort to tighten fiscal policy is needed,” Farr said.

The Turkish lira has depreciated nearly 40% against the dollar over the past year, underscoring the currency's vulnerability. On the contrary, Bitcoin has seen a significant increase in Turkey, reaching its highest value since June 2023.

A survey found that 58% of Turkish investors see crypto as a long-term wealth building tool. Additionally, 37% consider it a hedge against a devaluation of the local currency.

Bitcoin at the forefront, Ethereum and stablecoins see high demand among Turkish investors. This shift to digital currency has been driven in part by the devaluation of the lira against the US dollar, prompting many to migrate to cryptocurrencies.

The Turkish government is responding to the crypto trend with regulatory measures. Finance Minister Mehmet Şimşek indicated that the general crypto rules are being finalized.

Read more: Crypto Regulation: What are the Pros and Cons?

These regulations subject crypto exchanges to the same strict oversight as traditional financial institutions. The Capital Markets Board of Turkey (CMB) enforces these regulations, ensuring operational, organizational and capital compliance alongside a strong IT infrastructure.