Turkish investors are flocking to the cryptocurrency market amid economic upheaval. In early May, demand for Tether, a US dollar-backed stablecoin, skyrocketed ahead of elections and has remained strong since President Recep Tayyip Erdogan’s victory. As the Turkish lira collapsed to new lows, the demand for stablecoins grew, with lira transactions accounting for 10% of total cryptocurrency trading volumes as of early June and reaching a high of 18% in May, as per data from Kaiko. This is a significant increase compared to the 4% recorded at the start of 2023.

Erdogan has pursued unconventional economic policies, including interest rate cuts to tame inflation as high as 80%, causing the currency to lose 80% of its value against the dollar since the 2018 election. Cryptoassets such as stablecoins are expected to offer people a way to maintain some value for their wealth. Regulations have also made it challenging to purchase gold or dollars with lira, according to Ebru Güven, a former banker and Istanbul-based university lecturer. Investing in stablecoins is perceived as a safe alternative for investors who seek to hold on to some value during periods of high inflation.

The demand for Tether is especially strong on local cryptocurrency exchanges such as BTCTurk, where it accounts for 20% of trading volume. On Binance, however, a global crypto exchange, Tether’s trading volume stands at 1%. Batuhan Basoglu, a 28-year-old graphic designer, has put all his savings into stablecoins and other cryptocurrencies to protect himself from uncertainty surrounding the lira’s future.

Despite historically low volumes, demand for stablecoins in Turkish markets remains robust, according to Dessislava Aubert, an analyst at Kaiko. In May, the firm observed that Tether’s share of trading volumes on local markets reached its highest level since 2020. As the lira continues to depreciate, Turkish investors will likely continue turning to stablecoins and cryptocurrencies to safeguard their investments.