Turkish Lira Vs. Bitcoin: Which Should You Buy At The Dip?

Turkish bitcoin, anyone? 

Turkey’s currency, the Lira, has been in the news since the start of this week as it finds new lows against the US dollar. Meanwhile, bitcoin, a cryptocurrency that has racked up significant declines amid volatile price swings since the start of this year, seems to be looking good in comparison. Yesterday it hit a 7-month high against the Turkish Lira. 

According to analysis by Bloomberg, the Turkish Lira has had more price swings as compared to bitcoin in the last 10 days. The last time something similar happened was immediately after Turkey’s constitutional 2017 referendum, which consolidated the country’s President Recep Erdoğan’s hold over the country. Back then, the Lira dropped precipitously by 9% a day before the referendum before recovering after the results were declared. During the same time period, bitcoin's price nudged upwards by 2%. (See also: Possible Trouble For Turkey ETF.)

What Is Causing The Turkish Lira’s Decline? 

To be sure, the set of factors at play in the cryptocurrency and currency markets are completely different. Bitcoin’s decline is a function of its novelty as a currency. Economists and traders are still figuring out its nuances within the context of finance. As such, regulatory announcements and news developments play an important role in determining its price movements. The Turkish Lira’s current fall has been ascribed to the combination of an exodus by international investors and economic mismanagement by the country’s President. (See also: Is Turkey The Next Brazil?)

Investors piled into currencies from emerging markets when interest rates in the Western world were low. But that dynamic has changed in recent times as prominent economies, such as the United States, have set down a path towards higher interest rates. Erdoğan’s economic policy of saddling the country with debt-financed infrastructure projects has also caused investors to lose faith in its economy, especially as it heads on a collision course with the United States. 

Should You Dump Bitcoin For Turkish Lira? 

In terms of overall decline, bitcoin still beats the Turkish currency on an overall basis. At the time that the article was published, Bloomberg calculated that bitcoin was down by 55% this year and the Turkish Lira had slid by 45% during the same time period. The latter is already showing signs of revival while bitcoin is still in the doldrums, as of this writing.

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.