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FxWirePro: Is Turkey seeking for alternative store of value in cryptocurrency avenue amid prevailing headwinds?

With Turkey’s national currency collapse making headlines around the world recently but the downswings seem to have slightly stabilized over the weekend, for now, continued bearish streaks, and with countries such as Venezuela looking to cryptocurrencies as an alternative store of value, could bitcoin offer a solution to market volatility? But the lira has continued struggling to stay calm and sold off once again towards the end of last week. As Turkey will observe a religious holiday this week, fresh policy announcements are less likely. 

Well, this seems to be a good time to recapitulate two developments late last week: 

1) The CBT survey of inflation expectations was published on Friday: expectation for end-2018 inflation worsened notably from an already bad 13.9% to 16.5% in August; the market expects some moderation back to 13% levels by Q3 2019, but this level is hardly encouraging.

The market consensus, even before last week's lira crisis, was for 18% inflation by this year-end; it will very likely have to be revised higher as the lira exchange rate shows no sign of heading back to its old range. The market's GDP growth forecast for this year also fell by 0.5pp in August. 

2) Turkey's consumer confidence index dropped 4.8pts m/m in August and now looks similar to the business sentiment and PMI indicators, which declined sharply over the past couple of months. 

Overall, the Turkish lira crisis is rapidly filtering through to inflation and economic sentiment, which opens the door for second-round impacts. The longer the problem persists, the larger this impact will be. 

Please glance at below comments from some experts in the blockchain space, including representatives fromUltraandKowala who have shed some light on this currency crisis in Turkey with their insight, and how cryptocurrencies such as bitcoin could potentially offer a solution in countries where the monetary system has been adversely impacted.

Eiland Glover, Founder and CEO of Kowala commented: "Interest rate manipulation by the central bank appears to be Turkey's only option. But what about a future where in which governments lack much of the power to create such economic crises in the first place? We are witnessing the end to the nation-state’s monopoly on the creation of money. 

New decentralized and stable—cryptocurrencies are on the horizon. These will soon enter the marketplace as viable alternatives to government fiat. Before blockchain, the idea of burning money was not possible for those in control of the money supply. 

Price stabilizing mechanisms such as autonomous money supply control are much simpler and more effective than the current tools at Central Banks' disposal. As this happens, money will simply become another product, and consumers and businesses will be able to choose from among many viable currencies just as easily as choosing a brand of laundry detergent. When this happens, the market will be better at washing out individual failed firms instead of allowing the crises to build to the level of failed states and contagion."

Nicolas Gilot, Co-CEO of blockchain-powered gaming distribution platform Ultra says:

“Cryptocurrencies have become increasingly popular in countries such as Venezuela, where the local economy is in turmoil and the currency is struggling. Bitcoin has now become a store of value, and many recognize it as digital gold instead of a payment system. 

As the lira’s crisis deepens, Turkey’s crumbling economy could also turn to bitcoin in its hour of need as it offers an alternative solution to hyperinflation and a collapsing currency.”

Currency Strength Index: FxWirePro's hourly BTC spot index has shown 174 (which is bullish), while hourly USD spot index was at -129 (bearish) while articulating at 12:56 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex

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