Crypto industry has been going through a rough period and it is first time recession for crypto market, since the launching of the first cryptocurrency Bitcoin. This period of high inflation and ongoing recession, puts the crypto market on the test for sustainability, although, the price of Bitcoin in the last months remains stagnant, it already proved its use-cases. This new world geopolitical situation proves once again the utility and real world use-case of cryptocurrencies, especially the use of DeFi (to avoid custody to your private funds). Refugees had fled from Ukraine and the only asset they could’ve taken with them was Bitcoin, because they couldn’t withdraw their money from the banks. Countries have used bitcoins in national trades and once again, Bitcoin proved its value, because it is the only real decentralized asset or money in the world that is censorship resistant. Although, there is a full ban in 9 countries, many people are trading crypto P2P, especially in countries with unstable fiat currencies to hedge against hyperinflation.
The Euro-zone is in big crisis and already shows signs of recession, the inflation stands at 10% and GDP annual growth rate projection has fallen from 4.2% to 2,3%, also the business confidence 0.54 points from previous 0.74 points and the retail sales went down from 0.8 points to -1.8 points. The Euro was traded around $1.05 in the second week of December, close to levels not seen in five months, benefitting from a general US dollar weakness amid hopes the FED will slow down the pace of interest rate increases, while waiting for the next ECB move that will deliver a 50bps rate hike on December 15th, following two straight 75bps rate increases.
According to my analysis, it is possible that the inflation is close to its peak in the 1Q of 2023 and that further rate increases will be necessary, which will have negative outcome in the Eurozone. That’s the sacrifice that ECB needs to do in order to slowdown the raging high inflation. In the upcoming recession, the economy will stagnate and there won’t be economical growth in the next year, there will be many people that will loose their homes and jobs, many companies will be closed and many banks will fail.
On the list of countries with highest inflation rate at the moment Zimbabwe leads the race followed by Lebanon, Venezuela, Syria, Sudan, Argentina and Turkey.
Country inflation rate
Sri Lanka 61%
Ghana 40.4 %
Turkey is struggling with severe inflation rate for the last year and half and at the moment stands at 84.4% in November 2022, which came from 85.5% in the previous month.
- Prices for transportation are 107% higher
- Cost of housing and utilities is 82.9% higher
- Furnishings, household equipment, routine maintenance is 92.8% higher
- Clothing and footwear prices rose 37%
- Hotels, cafes and restaurants are 80.3% more expensive
- Food & non-alcoholic beverages have doubled their cost, which at the moment is 102.6% higher
The hyperinflation, that ranks Turkey at 8th place, would be the key point and the main reason for global mass crypto adoption, as many other use-cases. On the other hand Turkey leads the race again in terms of crypto adoption, unlike stocks and bonds, governments don’t have control over cryptocurrencies therefore, individuals and institutions can use and trade crypto and no censorship is possible.
The survey by Statista polled between 2000 to 24,000 residents in 56 countries.
Top 10 ranking countries leading crypto adoption.
Crypto prices have plunged anywhere between 65% to over 96% in some cases, and some crypto failed. Crypto based companies have financial problems with liquidity in the current bear market or resorting to mass layoffs to cut costs in an attempt to keep the companies alive. Currently in Turkey there are over 8 million citizens currently involved in crypto according to a recent report, it is a necessity for these citizens to preserve their money.
There are many small businesses exchanging local currency for Bitcoin and Tether (stablecoins) easily in the bazaars of Istanbul. In country with hyperinflation like Turkey, and a rapidly depreciating national currency (Lira), Turkish citizens are into other investment, such as crypto, to protect the value of their earned money so as to be able to pay their bills and survive the hard times. The Turkish government banned cryptocurrency use to pay for goods and services, while trading them is allowed. All indicators showed accelerated crypto adoption in Turkey over the past two years, as time passes, people trust more Bitcoin than their national fiat currency called Lira.