For some developing countries, inflation is an extremely acute economic problem that indicates a rise in the cost of goods and a drop in the population's purchasing power. The countries experiencing the highest inflation today are Venezuela (360%) and Zimbabwe (315%).
Inflation is generally caused by short-sighted political decisions. In Turkey, the rise in prices was caused by President Recep Erdogan's refusal to tighten the country's monetary policy. The low key interest rate and high government spending caused the economy to overheat, leading to skyrocketing inflation from 20% in mid-2021 to 80% in mid-2022.
As a result, Turkey faced a significant increase in the prices of imports, and even Bitcoin, which is still trading at a 50% discount from its all-time high, has set new highs against the Turkish lira.
Turkey authorities are putting up all kinds of roadblocks in the way of cryptocurrency's penetration into the economy. In 2021, the country banned the exchange of lira for digital assets and vice versa. As such, despite Turks' strong interest in cryptocurrencies, the country has not become a new crypto hub.
Things are a bit better in Argentina, whose population is also suffering from high inflation and devaluation. Argentines try to exchange spare pesos for Bitcoin or stablecoins as soon as possible, which is why the country leads Latin America in crypto transactions with $85.4 billion a year.
One of the possible solutions to the economic crisis offered by politicians is the rejection of the national currency and the transition to settling financial transactions in US dollars. But El Salvador's president, Nayib Bukele, whose country has already travelled down this road, advises moving to Bitcoin instead of the dollar. Michael Saylor, head of MicroStrategy, the world's largest public holder of Bitcoin, shares a similar opinion.
Digital assets have a higher degree of penetration in countries with high inflation. In Argentina, for example, at least 11% of the total population uses cryptocurrency, while that figure stands at 4.2% globally.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)
