Lack of trust in official currency has led to surging interest in cryptocurrencies – despite their volatility and government opposition
First published on Fri 21 Jan 2022 02.00 EST
In the offices of Altcointurk, a cryptocurrency hub tucked away in a sidestreet in Istanbul’s bustling Kadıköy neighbourhood, two wall-mounted TV sets showed the live value of currencies bitcoin and Ethereum, both graphs sloping downwards.
Altcointurk’s all-male inhabitants were not worried – in the chaotic world of cryptocurrency, their fortunes could soon change.
“A lot of people come here, some are rich, some are poor. But the target is always getting rich – although a lot of people think that if they invest a hundred dollars, they will get a million,” said one founder of Altcointurk known only as Shark, who pointedly added that he has trademarked his nickname.
“Other people come here to take their first lessons in the technical side of crypto, and then start to trade,” he said.
Altcointurk was founded to teach Turkish citizens about how to invest in cryptocurrencies, which provide a digital, decentralised alternative to the mainstream financial system.
Cryptocurrency trading has boomed in popularity in Turkey during a financial crisis that halved the value of the lira last year, while inflation recently surged above 30%, a two-decade high.
While most Turkish citizens looking to avoid the devaluation of their savings in lira tend to reinvest in dollars or gold, an increasing number of younger investors see cryptocurrencies as the way forward.
This has drawn the ire of the government, particularly President Recep Tayyip Erdoğan, who declared that “we are in a war against Bitcoin” and recently unveiled a programme to encourage Turkish citizens to switch their savings to lira and stash the cash in the banks.
To cryptocurrency believers, the increasing lack of trust in government solutions is proof that digital currencies are the best alternative to Turkey’s embattled lira.
Yet whether cryptocurrencies genuinely provide an opportunity to get rich is unclear. Evangelists such as the Altcointurk founders say that if the influx of unknowing investors risk falling prey to scams or simply wasting their money, it is the fault of the individual.
“People play at cryptocurrency trading like they’re gambling, like betting,” said Shark. I ask if this means people are essentially trying to gamble in order to get rich. “Yes, yes. It’s exactly like betting,” he said, laughing.
Shark declined to reveal how much money he has made through cryptocurrency investments, citing concerns that the government might suddenly swoop in and tax his gains.
Altcointurk members – by their own estimates – have trained more than 300 people since the hub started five years ago, and more attend a weekly event they host to preach the wonders of crypto.
But they are careful how they operate in an uncertain regulatory environment, sticking purely to teaching people how to trade rather than directly assisting or discussing the benefits of any one currency. “We’re providing a point of view,” said Shark.
Cryptocurrencies exist in a legal grey area in Turkey. The government banned their use to pay for goods and services in April last year, while trading them is still permitted.
Several exchanges, where citizens can trade lira or usually US dollars for cryptocurrency, have closed in recent months amid confusion over the trade’s legal status. Others have closed following high-profile scandals, such as the exchange Thodex, which shut down after the owner fled the country taking at least $2bn (£1.5bn) in funds with him.
But for some, the sense that others are getting rich outweighs their own sense of risk. “The huge volatility encourages people, as well as the news that other people made profits from previous bull runs,” said one crypto investor, who asked to be identified only by his initials, BG.
BG owns a digital media agency, and began investing in cryptocurrencies in 2017. “Even my mother is asking me to help her invest in Bitcoin now,” he said. “This started with the young, and now older people are interested. They give their money to their children or younger people and say: ‘Invest this for me, let’s see how it goes.’
“The risk is not investing itself, it’s because people might invest in unregulated exchanges without any protection from the government and end up losing all their money.”
The true size of the cryptocurrency market in Turkey is hard to estimate as many of the figures are produced by the industry itself. Bitcoin.com, a news site associated with the cryptocurrency, said in December that Turkey had surpassed a million trades a day.
An estimated 5 million people in Turkey currently operate cryptocurrency trading accounts, according to politicians seeking to regulate the trade.
“While there’s clearly some segment of the market that can invest in cryptocurrency, I don’t think it’s for the average consumer to all hold a bit of crypto,” said Ganesh Viswanath-Natraj, an expert in the relationship between cryptocurrency and emerging markets at Warwick Business School.
Viswanath-Natraj pointed to the appeal of cryptocurrency in countries such as Turkey or Venezuela where inflation is high, but added that consumers are more likely to benefit if they choose so-called stablecoins, whose value is pegged to external factors such as the dollar. “The day-to-day fluctuations in Bitcoin are in the order of 10%, it’s high, so I wouldn’t advocate a complete reshuffle of savings to speculative cryptocurrencies,” he said.
Following a steep drop in the value of the lira last December, Erdoğan announced a new financial scheme to encourage citizens to deposit their money in Turkish banks to raise the value of the currency. The scheme has attracted 90bn lira (£4.7bn) in deposits, but little of this has reportedly come from foreign currency as intended.
“It’s a win-win opportunity on paper,” said BG. He said he declined to participate, as the programme requires long-term investments. Others, he said, felt it was simply too risky to trust the government.
“People opposed to the government, those that support the [political] opposition, they have trust issues,” he said. “Once you have trust issues, you don’t convert your money and enrol in a government campaign like this. It’s a good idea on paper but fundamentally it won’t solve any economic problems. Long-term, it’s not going to help anything.”
As the government attempts to encourage lira investments, Turkey’s parliament is drafting a law to regulate cryptocurrency markets, currently the subject of fierce debate among crypto enthusiasts.
Some fear undue regulation in an industry where freedom is prized. Others say that limited regulation is necessary to protect consumers from predatory exchanges.
Professional traders such as Bünyamin Emeç were dismissive of the government’s attempts to regulate the industry. “They have no clue what they’re doing, and decisions will be made by people who don’t understand how cryptocurrency works,” he said.
The appeal of engaging with an industry without government interference is also seen by some like Emeç as a reason to invest. “I call on people to move towards these liberating [trading] platforms – this is my mission, basically. It’s a way of life,” he said.
Emeç said continuing to invest in cryptocurrency was the only way for him to recoup $10m in digital currency trading losses and a Bitcoin scam that cost him more than $1m. “It’s a very volatile market, so I can only get that amount of money back through the same market,” he said.
Additional reporting: Gökçe Saraçoğlu
This article was amended on 25 January 2022. The name of the cryptocurrency hub in Istanbul is Altcointurk, not Altcoin as stated in an earlier version.