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Turkish Lira Steals The Spotlight From Bitcoin

By AMarkets CompanyForexAug 16, 2018 07:37AM ET
www.investing.com/analysis/turkish-lira-steals-the-spotlight-from-bitcoin-200338969
Turkish Lira Steals The Spotlight From Bitcoin
By AMarkets Company   |  Aug 16, 2018 07:37AM ET
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Have you ever wondered, that the cryptocurrency may not be the most volatile instrument in the financial market? Digital money became a highly profitable speculative asset a year ago, stealing the show from other classic instruments. Back then traders the world over were drawn to the crypto market because its enormous volatility opened up endless profit-making opportunities. A year after, when the rush began to calm down, the crypto industry isn’t a hype anymore. However, some investors keep fixating on BTC, missing a chance to earn from the traditional currency market.

A few days ago, Turkey’s economy entered a full-fledged economic meltdown, which resulted in a serious storm in the foreign currency market. Analyzing the price fluctuations, we can most assuredly say, that the Turkish lira’s current volatility very much exceeds that of Bitcoin. It’s also worth noting, that compared to Bitcoin swings, which are often hard to foresee, the plunge in the Turkish lira was quite predictable and can be easily explained.

The thing is that Turkey became another victim of the US financial and economic sanctions and Donald Trump’s administration in particular. Given the state of its balance of payments and its extreme dependence on the US imports, the sanctions immediately drove the Turkish economy toward the crisis. Turkish lira plummeted to its record lows, the inflation entered a double-digit territory, hurting consumer activity.

At the same time, the US dollar began to grow, which is also more than predictable given its safe-haven property. The expensive dollar, by the way, poses a major threat to emerging markets. Higher dollar makes it more difficult for the countries to fulfill their dollar-denominated debt obligations. Turkey’s debt exceeds $ 200 billion. And of course, the high risk of default will keep triggering extensive capital outflow, which at any moment can lead to yet another wave of selloff in the Turkish currency. We recommend you watch the price closely not to miss it.

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The collapse of the Turkish lira caused obvious downward trends in other risky assets. The euro, which had been struggling with the pressure of its American counterpart for a long time, finally folded and plunged to a 13-month low at 1.1350. Turkey's influence on the Euro rates is explained by fears that the economic crisis can very quickly spread from Ankara to the major countries of the European trade bloc. To date, Turkey's aggregate debt to Spain, France and Italy exceeds $ 150 billion.


And of course, if a full-blown economic meltdown hits the country, its potential default will be the reason why this debt will be placed in the category of unpayable. Given that the financial health of the same Spanish banking sector leaves much to be desired, the European Union may face big liquidity problems. It is the concerns for the safety of the European assets in Turkey that caused the breakout of the psychological support at 1.15. The bearish rally in the EUR/USD is now a self-sustaining process. The main target is located at 1.10 support. Hurry up to join this trend, the ship hasn’t sailed yet.

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Turkish Lira Steals The Spotlight From Bitcoin
 

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Turkish Lira Steals The Spotlight From Bitcoin

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