Turkish Lira is now more volatile than Bitcoin
The historical 90-day volatility of the Turkish Lira (TRY), a measure of the price movement against the US dollar (USD), has reached an annualized rate of 65%, according to data from TradingView. That’s 5 times more in 2 months. Bitcoin’s (BTC) historic volatility has fallen to 61%.
Increasing historical volatility implies that prices have moved more than usual. Assets with high volatility are considered risky investments, which means that 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 its unreliability as a medium of exchange and store of value due to severe price turbulence.
The Turkish Lira slumped around 9 to the dollar to 18.5 in the six weeks through mid-December before strengthening to reach 10. At the time of publication, it was trading at 13 , 83. Turkish President Recep Tayyip Erdogan has followed a strategy of cutting interest rates in times of rising inflation, which contradicts economic orthodoxy, and has replaced central bankers who opposed the cuts.
“Lower interest rates amid high inflation will cause people to sell the currency – a recipe for disaster according to traditional theory,” David Belle, founder of Macrodesiac.com and director of UK growth at TradingView.
In November, the Turkish lira weakened on the forex when Turkey cut borrowing costs for a third consecutive month even as inflation rose. When battling high inflation, countries typically use rate hikes and other tools to suck liquidity out of the market. Rate hikes increase the yield of the national currency and usually lead to an appreciation of the exchange rate. As the currency strengthens, the cost of imported goods decreases.
Bitcoin, which has a programmed or fixed monetary policy, offers a contrast, especially for struggling economies. The pace of expansion of the cryptomonnaie is reduced by 50% every four years thanks to a programmed code that reduces the mining reward.
The historic 90-day volatility of the tuque pound is now significantly higher than single-digit readings of major fiat currencies like the euro, pound and yen. However, it remains less volatile than “meme” cryptocurrencies like dogecoin and Shiba Inu.
By CoinDesk
The opinions expressed here are solely those of the author and do not necessarily reflect the views of Forex Quebec. Every investment and trading move comes with risk, you should do your own research when making a decision.
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or a solicitation to buy or sell currency contracts or CFDs. Although the information contained in this document has been taken from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may result from the fact that someone relies on such information.