For foreign tourists in Turkey, it’s a shopping bonanza.
Upscale shops like Louis Vuitton and Chanel are seeing long lines outside their doors.
“We’re buying clothes, we’re buying makeup, we’re buying brand names,” said Fatima Ali from Kuwait. “The prices are very cheap.”
The long lines stem from Turkey’s currency crisis.
Turkey’s currency, the lira, has lost 45% of its value against the U.S. dollar so far this year.
Economists cite several causes for the currency’s slide: Turkey’s large current account deficit… corporate borrowings in foreign currencies… and sanctions by the U.S.
For foreign tourists, this is great. Their money goes further in Turkey. But for the locals, it’s an alarming trend.
Take Melike Turkes, a Turkish mother of three. She’s worried about feeding her family.
Said Turkes, “Even basic things like butter and vegetables have increased a lot over the last few months. It’s very worrying when you see the prices go up week by week.”
To defend themselves, Turks are turning to a currency that’s not controlled by governments: bitcoin.
I’ll tell you why they’re using bitcoin in a moment. But first, you need to understand that the Turkish lira crisis is not a one-off story.
We’ve Seen This Before
Take Cyprus, for example.
From 2012–2013, Cypriot banks got into trouble lending money to Greece. When the Greek economy performed poorly, the banks went broke.
In response, Cyprus asked the European Union for a bailout. But it ran into strong opposition.
Instead, the Cypriot government came up with a bailout plan that raided people’s personal savings accounts. The initial plan was to seize 9.9% of deposits over 100,000 euros ($113,934) and 6.75% of deposits under 100,000 euros (the insured amount).
That led to a run on bank ATMs and bank holidays. And many Cypriots flocked to the streets to protest their government.
The plan ultimately affected Cyprus’ two largest banks.
The Bank of Cyprus seized 47.5% of assets over 100,000 euros in return for equity. And Laiki Bank customers lost all deposits over 100,000 euros.
Now, Cypriots don’t trust their government like they did in the past.
Another example is Venezuela.
The country is seeing record hyperinflation. So far in 2018, the annual inflation rate in the country is over 25,000%.
To put it into perspective, consider a cup of coffee in Venezuela. Two years ago, it cost 450 bolívars (less than a penny). Today, it costs 1 million bolívars ($4).
The problem won’t get better anytime soon. The International Monetary Fund (IMF) estimates Venezuelan inflation could top 1 million percent before the year is out.
If that’s the case, a cup of coffee in Venezuela could cost 4.5 million bolívars.
It’s having a devastating effect on the country and its citizens. Most people are unable to afford basics like food and medicine. It’s a struggle to survive.
Venezuelans lost faith in their government long ago.
So what have Cypriots and Venezuelans done in response?
They’ve both turned to a currency not controlled by a government: bitcoin.
Back in 2013, bitcoin was still more of a financial curiosity. But that didn’t keep Cypriots affected by the crises from buying it.
Bitcoin surged from $40 to over $180 in month.
Venezuelans flocked—and continue to flock—to bitcoin as well. To them, bitcoin is a matter of survival.
Many use the country’s free electricity to mine bitcoin. And many others take whatever bolívars they make and convert them to bitcoin.
The LocalBitcoins volume in Venezuela continues to set records to this day.
With that in mind, can you guess what Turkish citizens are buying now?
Turkey Turns to Bitcoin
It’s no surprise that Turks are turning to bitcoin as their currency crisis unfolds.
Bitcoin trading at BtcTurk, a Turkish crypto exchange, is up 350% in recent days… And we expect the trend to continue.
As one bitcoin user in Istanbul stated, “Cryptocurrency makes me feel much safer.”
No government or bank owns bitcoin. And it has a fixed supply.
Politicians and economists can’t inflate it away. And they can’t steal it from you.
You never know when you’ll be part of a financial crisis. That’s why you should consider adding bitcoin to your portfolio today.
Bitcoin and other cryptocurrencies can be volatile. So we always recommend taking a small position size.
Analyst, Palm Beach Confidential