Bitcoin prices dropped on Friday, inching towards $60,000 in the latest sell-off that many said took place due to a crypto ban in Turkey.
Turkish central bank decided to ban all kinds of cryptocurrencies and their use in an overnight decision Thursday. The decision appeared as cryptocurrency volumes in the country surged 3,000 percent in the previous 12 months, primarily in the wake of the Turkish Lira’s decline against the US dollar and inflation rate topping at 16 percent last month.
Bitcoin Against Inflation
Speculators treat Bitcoin as a hedge against inflation and currency devaluation. It is typically because of the cryptocurrency’s limited supply cap of 21 million tokens — and its ability to operate independently as a payment settlement system, away from central banks’ and governments’ jurisdictions.
The renewed interest in the cryptocurrency came after Turkey’s President Recep Tayyip Erdogan sacked the central bank leader Naci Agbal, who had raised interest rates to limit the Lira’s decline. Economists saw it as a sign of more inflation and fiat devaluation.
In response, Bitcoin rose to fame in Turkey with its ask price on peer-to-peer exchanges reaching as high as $100,000 in mid-March after Agbal’s dismissal.
With Bitcoin’s growing demand in international markets against similar concerns, its price surged to as high as $64,896 earlier this week. The benchmark digital asset started falling lower after establishing the said week. So it appears, Turkey’s ban merely accelerated the sell-off heading into the Friday session.
At its intraday low, bitcoin was trading for as low as $60,048.
Ronnie Moas, the founder of Standpoint Research, took his Twitter account to rubbish theories that connected Bitcoin’s Friday decline with its ban in Turkey.
“[Bitcoin’s] 6 percent drop below $60,400 on news from Turkey is ludicrous,” the investment analyst tweeted. “Their leadership, led by Erdogan, is dysfunctional and Turkey accounts for less than 1% of the world population. Their currency (lira) has recently collapsed (and the opposition party is against this crypto ban).”
Bans have seldom translated into a bearish breakdown in the Bitcoin market. A strict call to ban crypto trading in September had done little to stop the cryptocurrency from climbing to its all-time high of $20,000. Speculation about a potential ban in India and Nigeria also resulted in nothing — bitcoin prices kept rising without breaking a sweat.
That is partly because placing a ban on Bitcoin is equal to barring the internet, says the US Securities and Exchange Commissioner Hester Peirce. She said:
“I think we were past that point very early on because you would have to shut down the internet. As I’ve said in the past, I don’t see how you could ban it … I think it would be a foolish thing for the government to try to do that.”
Banning cryptocurrency technically shifts otherwise visible trading firms underground. That was visible after the Reserve Bank of India imposed banking restrictions on local crypto companies. That resulted in a spike in peer-to-peer trading activities. Traders in China also used dark bitcoin channels to bypass capital controls.