War, devaluation, and conflict have plagued regions like the Middle East, South America, and beyond, leading to massive hyperinflation, currency devaluation, and the erasure of people's life savings. In these crises, banks often refuse to allow withdrawals, forcing people to make long lines at ATMs just to access a small fraction of their funds. Historically, gold has been the go-to safe haven against such economic turmoil, offering a tangible store of value when currencies fail. However, the modern world has introduced a new, more secure, and liquid alternative—Bitcoin. Unlike gold, Bitcoin can’t be stolen from your safe, it’s easily moved across borders, and it remains highly liquid in a global market.
Bitcoin’s decentralised nature is a game-changer in the world of finance. Unlike traditional currencies controlled by central banks, Bitcoin operates on a peer-to-peer network, free from the influence of any single government or financial institution. This decentralisation ensures that no central authority can manipulate its supply or devalue it through reckless monetary policies. Furthermore, Bitcoin allows for self-custody, empowering individuals to hold and manage their assets independently, without relying on banks or other intermediaries. The following article explores how Bitcoin’s adoption is being powered by hyperinflation around the world.
Lebanon: A Crisis of Unprecedented Magnitude
“Financial engineering" implemented by the Bank of Lebanon (BDL) was designed to maintain an artificial parity between the Lebanese pound and the US dollar by attracting ever-increasing bank deposits with promises of high interest rates—up to 15%. This strategy was unsustainable, and when it failed, Lebanon plunged into a downward spiral. Lebanese citizens lost access to their savings, now trapped in the banks, while on the black market, dollars traded for about 20,000 Lebanese pounds, a devastating exchange rate.
According to the World Bank, Lebanon's economic situation is one of the "most severe global crises since the mid-nineteenth century." This catastrophe has been driven by three decades of imprudent fiscal and monetary policies, leading to a collapse of the Lebanese Pound (Lira), which has lost over 95% of its value. The currency's collapse, coupled with widespread corruption and a banking sector in turmoil, has pushed the Lebanese people into extreme hardship, eroding life savings and leaving many struggling to survive, with consumer price inflation skyrocketing to 290% year-on-year in August 2021, the highest in the world.
The situation in Lebanon is a glaring example of the risks associated with centralised monetary policies. The banking sector, once a pillar of the Lebanese economy, has crumbled under the weight of bad debt and mismanagement. As the crisis deepened, the Lebanese government imposed strict capital controls, limiting citizens' access to their own money. Even USD deposits were not spared, transforming into what locals have dubbed "Lollars," a term that reflects the stark devaluation and financial reality in the country. In practical terms, having $100 in the bank could equate to being able to use only $10, underscoring the severity of the currency's collapse.
Despite four years of chaos, Lebanon still lacks a capital control law and effective crisis management measures. The situation has left many Lebanese citizens turning to Bitcoin as an alternative to the traditional banking system. Unlike fiat currencies, which can be devalued through excessive printing by central banks, Bitcoin is limited to 21 million units. In an economic environment where the government prints new money to delay turmoil and stay in power, Bitcoin’s hard cap of 21 million provides citizens with sound money to save and transact.
Patrick Mardini, a professor of finance and director of the Lebanese Institute for Market Studies, emphasised this point, stating, "Despite their high volatility, cryptocurrencies are a safer investment than the Lebanese pound. Yes, Bitcoin can lose 30 percent of its value, but the pound has lost 100 percent." As long as there is no sound monetary policy and the public deficit is financed with money printed by the central bank, the currency will continue to depreciate, and Lebanese citizens will increasingly turn to alternatives like Bitcoin.
Samar Hawa of Rebirth Beirut, an initiative committed to supporting Lebanon during this time of economic crisis, reflects on the nation's resilience, saying, "The Lebanese, like a Phoenix, rise from the ashes. It's beautiful but sad." This sentiment captures the spirit of a nation grappling with profound challenges, and it resonates with the mission of Rebirth Beirut, which has even started receiving Bitcoin donations to fund its initiatives. These donations help projects such as installing cables from private generators to light up the streets, highlighting how Bitcoin is not just a financial tool but also a means of societal rebuilding proving that sound money is an essential pillar of every flourishing economy.
Georges Haddad, who returned to Lebanon following the financial collapse to help rebuild his country, sees Bitcoin as a solution to Lebanon’s broken monetary system. He states, "The moment you start understanding Bitcoin, you see how broken money is. It's broken everywhere." Haddad’s perspective reflects a growing awareness among Lebanese citizens of the potential of Bitcoin to protect against the risks of fiat currency. Many Lebanese have become unbanked or have been forced to hoard rapidly debasing cash at home due to the financial crisis, and Bitcoin offers an alternative that is immune to the failures of the traditional monetary system.
Turkey: A Nation’s Struggle with Currency Devaluation
Turkey's economic challenges present another compelling case for Bitcoin adoption. In recent years, the Turkish Lira has undergone dramatic depreciation, losing more than 80% of its value against the US dollar over five years. Inflation in Turkey has reached staggering levels, with the rate soaring to 85% in 2022, and estimates from independent experts suggest that the real inflation rate could be even higher. This environment has driven millions of Turks to seek refuge in Bitcoin as a hedge against the ongoing currency crisis.
I visited Turkey at the end of 2023, where I noticed a significant trend of Bitcoin adoption, particularly in the touristic towns of Antalya in the Turkish Riviera. Antalya, home to many
expatriates, especially from Russia and Ukraine as a result of the Russian invasion of Ukraine, has become a significant hub for Bitcoin activity. Due to international sanctions, many Russians hold vast amounts of Bitcoin to transfer their wealth and avoid bank restrictions. Additionally, with the hyperinflation of the Turkish Lira, many large purchases, including real estate, are increasingly being made in Bitcoin. I observed numerous real estate companies advertising properties with prices listed in Euros, but more interestingly, in Bitcoin. The Bitcoin price is often prominently displayed on many real estate advertisements. One of the largest real estate agencies in Antalya, Antalya Homes, transacts with and accepts Bitcoin as a way to purchase property. Furthermore, Bitcoin ATMs are becoming a common sight in Antalya, providing easy access to the cryptocurrency.
The Turkish government’s unorthodox monetary policies, including significant interest rate cuts in the face of rising inflation, have further eroded confidence in the national currency. The value of the Lira has plummeted, and with it, the purchasing power of Turkish citizens. As a result, Bitcoin has gained significant traction as alternative stores of value. The adoption of Bitcoin in Turkey is not just a response to economic instability but also a reflection of a broader desire for financial autonomy and protection from the state’s short term focused economic policies.
Turkey has emerged as one of the world's leading countries in cryptocurrency adoption. The country's crypto market has seen a significant boom, driven by years of double-digit inflation and the Lira’s steep devaluation. With $170 billion flowing into the country’s crypto market over the past year, Turkey ranks 12th in the world for crypto transaction volumes, surpassing major economies like Germany and Canada. This surge in crypto adoption is attributed to Turks’ lack of confidence in their national currency and their search for stable investment alternatives.
Crypto exchanges in Turkey have reported a continuous rise in activity, with citizens increasingly using Bitcoin for a variety of purposes, from gifting and peer-to-peer money transfers to receiving salaries and making charitable donations. The growing interest in Bitcoin is also driven by the country’s tech-savvy youth, who see digital assets as a viable alternative to traditional investments in an economy where inflation and currency volatility have made wealth accumulation difficult.
Yasin Oral, CEO and founder of the Turkish cryptocurrency exchange Paribu, explains that the currency issues in Turkey have led individuals to seek alternatives like Bitcoin to store value, diversify their investment portfolios, and engage with new asset classes. Ben Shou, co-founder of the crypto exchange Bybit, adds that Turks view Bitcoin as a more stable store of value than the Turkish Lira, which is rapidly losing its purchasing power due to inflationary policies.
The Turkish government, recognising the significance of cryptocurrency in the lives of its citizens, has taken steps to regulate the market. New rules are expected to focus on licensing, taxation, and measures to improve digital security. These regulations aim to prevent abuse of the system while also reinforcing trust in the sector. Despite these regulatory efforts, the government remains cautious about imposing strict controls, as doing so could alienate millions of crypto users who see Bitcoin as a lifeline in the face of inflationary pressures.
Bitcoin: A Long-Term Hedge Against Inflation
In both Lebanon and Turkey, where central banks have failed to maintain the value of their currencies, Bitcoin offers a decentralised alternative that mitigates the risks associated with traditional monetary policies. By providing individuals with the ability to store and transfer value independently of the traditional financial system, Bitcoin empowers people to safeguard their wealth in the face of economic uncertainty.
The experiences of Lebanon and Turkey highlight the importance of financial sovereignty in an increasingly volatile world. As inflation continues to rise globally and central banks struggle to manage their economies with the often-cited inflation goal of 2-3%, Bitcoin’s role as a hedge against centrally controlled currencies is likely to grow. For those living in countries where traditional currencies are rapidly losing value, Bitcoin offers a beacon of hope—a decentralised, secure, and resilient alternative to the instability of centrally controlled economies.
Conclusion
Over the last 10 years, despite short term volatility, Bitcoin has appreciated in price on average 55% per annum. Given all centrally controlled currencies devalue through legally sanctioned counterfeitly and fractional reserve banking it is little wonder that citizens around the world are turning to Bitcoin to store value and transact.
Lebanon and Turkey provide compelling case studies of how Bitcoin can serve as a hedge against the failures of centralised monetary policies. In Lebanon, where the banking sector has collapsed and the currency has lost nearly all its value, Bitcoin offers a means of preserving wealth and accessing funds without the need for external permission. In Turkey, where inflation has reached alarming levels and the Lira has depreciated significantly, Bitcoin is seen as a more stable store of value and a way to protect against the ongoing currency crisis.
As global economic challenges continue to mount, the role of Bitcoin as an answer against inflationary theft and centralised currency failures is likely to become even more significant. The experiences of Lebanon and Turkey underscore the potential of Bitcoin to provide financial autonomy and protection in times of crisis, offering a decentralised and secure alternative to the vulnerabilities of traditional financial systems.
Given the propensity of governments to print money to remain in power with short-term Keynesian theftonomics, we expect Bitcoin’s adoption to be further accelerated by the never-ending string of hyper-inflationary economic failures. We look forward to the world’s first truly just and ethical money swallowing the evil power of central banks.
Further Reading:
Forbes. "Lebanon's Economic Rebirth Through Bitcoin." February 2024. Available at: Forbes
CNBC. "In Bankrupt Lebanon, Locals Mine Bitcoin and Buy Groceries with Tether." November 2022. Available at: CNBC
Reuters. "Turkey's Crypto Rules Seen Addressing Licensing, Taxation After Boom." November 2023. Available at: Reuters
CoinDesk. "Turkey Cryptocurrency Explained." October 2022. Available at: CoinDesk
Statista. "Inflation Rate in Lebanon." Available at: Statista
BBC. "Turkey’s Inflation Crisis: Lira's Value Plummets." October 2022. Available at: BBC
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