Turkish Lira Is Now More Volatile Than Bitcoin

The lira nosedived in the final quarter of 2021 as Turkey cut interest rates amid high inflation.

Jan 7, 2022 at 12:06 p.m. UTC
Updated Jan 7, 2022 at 8:34 p.m. UTC

The Turkish lira is now more volatile than bitcoin.

The currency’s 90-day historical volatility, a measure of how much the price fluctuated from its average, against the U.S. dollar has risen to an annualized 65%, TradingView data show. That’s a fivefold increase in two months. Bitcoin’s historical volatility has dropped to 61%.

Rising historical volatility implies prices have been moving more than usual. Assets with high volatility readings are considered risky investments, which means the lira, a sovereign currency, is now riskier than bitcoin, a cryptocurrency created and distributed on a peer-to-peer basis and often criticized for being unreliable as a medium of exchange and store of value because of its high price turbulence.

The lira crashed from roughly 9 per dollar to 18.5 in the six weeks to mid-December before strengthening to as high as 10. At press time, it was trading at 13.83. Turkish President Recep Tayyip Erdogan has followed a strategy of reducing interest rates at times of rising inflation, which contradicts economic orthodoxy, and has replaced central bankers who opposed the cuts.

“Lower interest rates amidst high inflation is going to lead to people selling the currency – a recipe for disaster according to traditional theory,” David Belle, founder of Macrodesiac.com and U.K. growth director at TradingView, told CoinDesk in a WhatsApp chat.

In November, the lira weakened when Turkey cut borrowing costs for a third straight month even as inflation surged. When battling high inflation, countries typically use rate increases and other tools to suck liquidity out of the market. Rate hikes boost the yield on the domestic currency and typically lead to exchange-rate appreciation. As the currency strengthens, the cost of imported goods declines.

Bitcoin, which has a programmed or fixed monetary policy, provides a contrast, especially for troubled economies. The cryptocurrency’s pace of supply expansion is cut by 50% every four years through programmed code that reduces the mining reward.

Bitcoin and USD/TRY price charts and historical volatilities (TradingView)

The lira’s 90-day historical volatility is now significantly higher than the single-digit readings of major fiat currencies like the euro, pound and yen. Still, it remains less volatile than meme cryptocurrencies like dogecoin and shiba inu.


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Omkar Godbole is the senior reporter on CoinDesk's Markets team.