Research Report on Turkey’s Crypto Market
Preface
Turkey is one of the countries with the highest adoption rate of cryptocurrency in the world. According to data from HedgewithCrypto, the country’s adoption rate has more than doubled in the past three years, from 16% of the population to 40%. It is estimated that two out of every five citizens hold cryptocurrency. According to data from Chainanalysis, Turkey is also the fourth largest cryptocurrency market in the world in terms of estimated trading volume, ahead of other major economies.
November 2023 belongs to Istanbul, Turkey. Nearly 300 large and small peripheral activities will be held for two weeks. The entire crypto heat in November is focused on the Turkish market. Practitioners and crypto enthusiasts from the Americas, Asia, Europe, and the Middle East gather here to exchange their insightful views.
1、Macroeconomic Indicators and Current Situation
Turkey is the 11th largest economy in the world in terms of GDP. It is a founding member of the Organization for Economic Cooperation and Development (OECD) and a member of the Group of Twenty (G20). Turkey became a member of the European Union Customs Union on December 31, 1995. It is also one of the candidate countries for European Union membership.
1.1 Land and Population Size
Turkey is a country that spans the two continents of Asia and Europe. Its capital is Ankara, with a land area of 783,356 square kilometers. The country is divided into 81 provinces. According to systematic records, the population of Turkey in 2022 is 85,279,553, of which 93.4% live in provincial and regional centers, while only 6.6% live in towns and villages, with an average population density of 111 people per square kilometer. Between 1950 and 2020, the population of Turkey increased more than fourfold, from 20.90 million to 83.60 million.
1.2 Economic and Related Indicators
The World Bank classifies Turkey as a middle- to high-income country based on its per capita GDP in 2007. The CIA classifies Turkey as a semi-developed country, but economists and political scientists often identify Turkey as a newly industrialized country. Merrill Lynch, the World Bank, and The Economist magazine classify it as Emerging Markets.
Turkey ranks 17th in the world in terms of nominal GDP and 11th in terms of purchasing power parity. According to estimates by the International Monetary Fund, Turkey’s per capita GDP in terms of purchasing power parity in 2023 is $41,412, while its nominal per capita GDP is $11,932.
As of 2019, about 11.7% of Turks are at risk of poverty or social exclusion. The unemployment rate in Turkey in 2021 was 12%. According to the data of the World Bank, the middle class population in Turkey accounts for about 41% of the total population.
1.3 High Economic Growth and High Inflation Go Hand in Hand
Turkey has a well-developed banking industry with about 50 banks. As of March 2023, the foreign exchange reserves of the Central Bank of Turkey were 62.60 billion US dollars (a month-on-month increase of 2.3%), gold reserves were 52.20 billion US dollars (a month-on-month increase of 7.2%), and official reserve assets were 122.40 billion US dollars (a month-on-month increase of 4.3%).
In Quarter 1 of this year, Turkey’s GDP grew by 84.4%, while the depreciation of the lira was 26%, which led to Turkey Quarter 1’s GDP growing to $245.50 billion, the highest level ever.
Meanwhile, according to the data released by the Turkey Statistics Agency on November 3, 2023 local time, the inflation rate in Turkey reached 61.36% in October. The Central Bank of Turkey has also raised its inflation forecast for this year from 58% to 65%, and for 2024 from 33% to 36%. Currently, Turkey is one of the countries with the highest inflation rates in the world.
1.4 Turkey Economic Development Forecast
In February 2022, the OECD used PPP exchange rates to predict the long-term GDP of the largest 16 economies from 2030 to 2060: Due to population growth and urbanization, Turkey expects long-term GDP growth and is expected to enter the Top 5 ranking in 2060.
Since 2023, despite the measures taken by the Turkish government in the face of high inflation, prices have continued to rise. The continued rapid depreciation of the Turkish lira has exacerbated domestic economic turmoil, made imported products more expensive, and brought additional obstacles to the country’s economic stability.
In the long run, Turkey’s stubborn inflation is exacerbating household poverty. According to the latest official forecast, with consumer prices peaking, the situation will worsen in 2024. “Faced with staggering inflation, many households have insufficient income, and poverty has become a major problem in Turkey.” Istanbul economist Iris Cibre said that nearly 60% of Turkey’s labor force has a monthly minimum wage of 11,400 lira ($405), which is largely below the poverty line.
2、The Impact of Geography and Economics on Cryptocurrency Industry
2.1 Geopolitical Conditions are Promoting the Prosperity and Diversity of the Encryption Market
Turkey is located at the intersection of the Eurasian continent, with the geographical advantages of a bridge and hub. Turkey is also an important energy transit country between the Middle East and Europe, controlling the main route in and out of the Black Sea. This makes Turkey have a strategic position in energy supply and geopolitics, playing an important role in geopolitics. While it has an important impact on the stability of the following pairs of countries, such as Iran and Russia, it is also influenced by the mutual relations and culture of the Middle East, Russia, and Ukraine.
It is precisely because of this geopolitical relationship that Turkey has invisibly become a hub connecting Russia and the Web3 industry in the Middle East. It inevitably interacts with each other in terms of culture, economy, finance, etc. For cryptocurrency practitioners in various regions of Europe and Asia, it is a key node for communication, collision, and integration. From user characteristics to technical applications, from industry extension to deep cultivation of the track, under the influence of geopolitical factors, people are more likely to access and accept diversified industry trends, and give birth to a prosperous and diverse cryptocurrency market.
2.2 The Livelihood Economy is Promoting the Deepening of the Cryptocurrency Economy
Turkey has been experiencing economic hardships and lows in the past five years. Recent information shows that Turkey’s inflation rate has recently exceeded 83%, reaching a 24-year high. Due to the government’s unorthodox interest rate reduction policy, the lira has also hit a historic low against the US dollar. “Faced with staggering inflation, many households have insufficient income, and poverty has become a major problem in Turkey.” Istanbul economist Iris Cibre said that nearly 60% of Turkey’s labor force earns a minimum monthly wage of 11,400 lira ($405), which is largely below the poverty line.
The funds with keen market sense will inevitably seek safe haven and pursue higher returns under the strong contrast between the domestic economic downturn and the subsequent cryptocurrency bull market cycle. Exchange and purchase of cryptocurrency assets have become the best choice. By exchanging and understanding the cryptocurrency industry through cryptocurrency assets, young people have developed a strong interest in new technologies, and more people have started to join in jointly promoting the deepening development of the Web3 industry in the region. In Turkey, the cryptocurrency industry has also become a popular and cutting-edge industry that meets the needs of the people.
3、The Current Situation of Turkey CryptocurrencyMarket
3.1 The World’s Fourth Largest Cryptocurrency Market
Recently (November 2023), Binance Research Institute released a research report titled “Current Status of Turkey’s Cryptocurrency Market”, which shows that 40% of citizens hold exposure to cryptocurrency investments, and 73% of Turkish respondents believe that the number of cryptocurrency investors will continue to increase in the next five years. As the fourth largest cryptocurrency trading market in the world, Turkey’s cryptocurrency trading volume is significantly higher than that of several other major economies in the world. Binance’s internal trading data also shows that in early September this year, Turkey’s lira (local fiat currency) once ranked first among the entire exchange’s fiat currency trading pairs, accounting for an astonishing 75%.
In addition, Turkey’s citizens’ acceptance of encryption is not far behind these countries. Based on the same encryption acceptance index standard, Turkey can also rank 12th in the world. Considering its positioning in the world’s geo-economy and its small size compared to other economies, Turkey’s acceptance of encryption is very high.
3.2 The CryptoCurrency Market Has a Strong Atmosphere and High Popularity
According to a public opinion poll, Web3 and cryptocurrency have become deeply integrated into people’s lives in Turkey.
- The roadside Teller Machine (similar to the deposit machine of the Bank of China) can conduct cryptocurrency transactions.
- Airport bridges and out-of-home advertising signs have many local exchange advertisements displayed.
- There are many offline places for Cryptocurrency OTC exchange.
- Real estate transactions or offline catering both support cryptocurrency transactions and payments.
Many younger generation friends will hang decorations with the Bitcoin logo in their bedrooms, and many people will also talk about Bitcoin on TV programs. A large number of young people regard the Web3 business as the key to controlling and changing their destiny, and are enthusiastic about communication and sharing. The technical atmosphere is very strong.
In a survey conducted by Twentify, a consumer research company commissioned by Binance, over one-fifth (21%) of the respondents invested in Cryptocurrency. In this ranking of investment tool popularity, cryptocurrency is second only to Turkey’s official currency, the Turkish lira. It is worth noting that the adoption rate of cryptocurrency is higher than that of traditional asset classes such as precious metals, stocks, and bonds.
3.3 CEX Usage is Mmuch Higher than Decentralized Wallets
Turkey’s users have a strong dependence on CEX. The daily trading volume of cryptocurrency users across the entire network (all CEX) reached the level of 500,000 to 700,000 people in December 2021. With the market downturn, in February 2023, the number of cryptocurrency trading users across the entire network in Turkey decreased to the range of 270,000 to 410,000 people. Among them, Binance, Bybit, OKX, and KuCoin, which are most recognized and liked by Turkish users in the global CEX, all support Turkish language and Turkish lira (TRY) deposit trading. Paribu and CoinTR, which are located in Turkey, have obtained the registration permission of the Turkish regulatory agency, the Turkey Financial Crime Research Association (MASAK), and have cooperated with two state-owned banks in Turkey, Zirrat Bank and Vakif Bank, to open fiat currency trading.
On the contrary, the usage rate of non-custodial wallets in Turkey is relatively low. Recently (November 2023), Binanc officially launched the Binance Web3 wallet during Turkey Blockchain Week, and Bitget Wallet also announced the launch of the Turkey Ecological Development Plan. Based on the convenience and profit potential of Web3 wallets, as well as the growing interest in emerging concepts such as NFTs and metaverse, it will to some extent catalyze the use of decentralized wallets by Turkish users to enhance the diversification and maturity of the regional market.
3.4 Turkey Popular Track and Apps
Most users are concentrated on CEX, so there are few DeFi projects. However, Gaming projects are very popular in Turkey, with GameFi, SocialFi, and NFT projects all popular among ordinary users. In addition, there are also a small number of infrastructure projects, but because there are not many VCs in Turkey, there are even fewer investments in Web3, and the overall fundraising ability is much worse than that of Taiping and Europe and the United States.
Among them, the blockchain research institute of Turkey government entity “Turkey Science and Technology Council” has a view on the application of digital currency. They are more optimistic about DID and putting government data on the chain through smart contracts.
Data shows that nearly 16% of website visits to Lens Protocol come from Turkey, and Turkish users are very fond of searching for “free Bitcoin” on Google. They will look for websites that do tasks and receive small amounts of Bitcoin for free. This to some extent indicates that SocialFi or chasing airdrops are very popular in Turkey.
Source: 3WW3 Asia-Africa-Latin America Research Institute Space Activities
4、Turkey User Characteristics Analysis
Binance’s research report shows that among the surveyed people, up to 71% of investors check the market multiple times a day, while 46% of the surveyed people conduct at least one transaction per day on average, representing the local people’s enthusiasm for investing in encrypted assets. 66% of the people invest in encrypted assets for their expected profits, followed by simple portfolio management and optimism towards technology.
4.1 Young People are More Willing to Invest in Cryptocurrency
Turkey’s cryptocurrency market is vibrant and constantly evolving. Currently, 27% of investors holding cryptocurrency assets have been in the industry for less than a year, and more than a quarter of investors have entered the market in the past year, mostly young people under 30 years old.
According to the latest survey data from KuCoin on Turkey market users, the younger generation has a higher willingness to invest. The 31–44 age group accounts for 48% of the total number of people participating in cryptocurrency investment, and the 18–30 age group accounts for 37% of the total number. The cryptocurrency market in Turkey is vibrant and constantly developing, with cryptocurrency investors under the age of 30 entering the market in the past year.
Although male investors still account for 57% of all cryptocurrency investors, the proportion of young female investors is increasing. Women account for only 37% of investors over the age of 45, but almost half (47%) of cryptocurrency investors aged 18 to 30 are women, indicating that the gender gap is gradually narrowing as cryptocurrency adoption becomes mainstream.
4.2 There are Differences in Preferences for Investing in Cryptocurrency among Different Age Groups
In Turkey, 58% of respondents said that their main motivation for investing in cryptocurrency is to accumulate wealth over the long term, which is consistent across all age groups, believing that investing in cryptocurrency can lead to wealth growth over time.
There are significant differences in investment strategies among different age groups: older investors prioritize value storage and portfolio diversification, while younger generations will pay more attention to trading convenience and short-term benefits.
- 37% of people mentioned that the main reason for investing in cryptocurrency is to store asset value, and 25% of people see diversified investment portfolios as the main motivation and recognize the benefits of cryptocurrency in reducing risk, mainly investors over 45 years old.
- 34% of people hold cryptocurrency for more convenient transactions, indicating that people recognize the efficiency and speed brought by encryption.
- 17% of people admit that their motivation is short-term and pure enjoyment of the profit investment process, which is in line with the experimental and exploratory nature of the crypto market. The emotions of these younger generations are more obvious.
Bitcoin is very popular as an investment choice for adult cryptocurrency investors in Turkey. 71% of investors expressed interest in investing in Bitcoin, with 79% of middle-aged and elderly investors interested. 45% of investors expressed interest in investing in ETH, with 52% of young investors interested.
In addition, about 33% of investors are interested in stablecoin investments, about 21% are interested in NFTs, about 19% are interested in the metaverse, and 18% are interested in emerging categories such as Meme coins.
4.3 The Promotion Effect of Word-of-Mouth Effect is Particularly Prominent
According to the survey, 57% of people were introduced to cryptocurrency through friends or family, and 35% through community introductions, highlighting the key role of interpersonal relationships in stimulating curiosity and encouraging new bees to enter the world of digital finance.
Whether through online forums, social groups, or local gatherings, the community provides a supportive environment for individuals to learn and explore Cryptocurrency concepts, reflecting the collaborative nature of the Turkey Cryptocurrency community. 32% of respondents pointed out that other traders played a role in their exposure to Cryptocurrency, which illustrates the interconnectedness of the trading environment. Individuals who start their Cryptocurrency journey often find guidance and inspiration from other traders navigating the same unknown territory.
Finally, social media has had a significant impact, with 27% of respondents attributing their entry into the crypto world to influential people. YouTube, Twitter, Telegram, and Instagram are trusted by cryptocurrency investors, especially young people, as reliable sources of information.
5、Turkey Regulatory Policies for Cryptocurrency Market
Turkey is already a highly accepted and well-known market in terms of blockchain and cryptocurrency. Large global cryptocurrency exchanges like Binance and Huobi have taken action to establish local exchanges in the country. The government has a vision of establishing a national blockchain infrastructure and a digital currency published by the central bank. Although Turks are very interested in cryptocurrency, Turkey does not have specific regulations for the cryptocurrency market.
5.1 Open with Caution, Relatively Loose Policies
For a long time in the past, the Turkish government’s attitude towards Web3 has been unclear. Although the Ministry of Digital and Technology of Turkey mentioned in a strategy paper in 2018 that it would establish a National Blockchain Infrastructure, it has not seen a big landing.
In 2021, the central bank issued a policy prohibiting Turkish citizens from purchasing or providing services based on cryptocurrency. However, the director of the digital transformation office under the Turkish presidential office refuted the rumor, saying, “The policy of banning encrypted transactions issued by the central bank at that time did not prohibit Turkish citizens from owning encrypted assets.”
Overall, the Turkish government is cautiously opening up the crypto industry, without strict restrictive policies or strong promotion of compliance policies. This makes Turkey’s crypto market more free, which is very conducive to the rapid development and popularization of the crypto industry.
5.2 Regulatory Policies will be Implemented in a Planned Manner
In October of this year, Turkey’s Finance Minister Mehmet Simsek announced that Turkey will introduce new legislation to cover cryptoassets in order to comply with FATF recommendations. This move aims to remove Turkey from the gray list, as being on the list may have a negative impact on a country’s investment rating and reputation. On October 27th, according to Cointelegraph, Turkey’s official gazette released the 2024 presidential annual plan, which aims to complete Turkey’s cryptocurrency regulations within the next year.
Bora Erdamar, director of the BlockchainIST Center, a blockchain technology research and development center, said, “Introducing certain licensing standards will be one of the top priorities of the new regulations.” He added that this will “also include capital adequacy requirements, measures to improve digital security, custody services, and reserve certificates.”
The implementation of regulatory policies indirectly indicates that the crypto market has taken root in Turkey. With more and more businesses entering and more frequent exchanges and collisions, regulatory policies will provide assistance for the prosperity and development of the crypto market, providing more convenience and security for practitioners and users.
5.3 Proposed Establishment of a Central Custodian Bank for Cryptocurrency
In order to avoid cryptocurrency exchanges running away and funds being trapped, the Turkish Ministry of Finance has decided to implement a central custodian bank mechanism for cryptocurrency. If this mechanism is implemented, Turkey will be the first country in the world to include cryptocurrency custody business in the list of enterprises, and the Central Bank of Turkey will control the storage and circulation of cryptocurrency.
In the long run, the establishment of a central custodian bank for Cryptocurrency provides a solution to safeguard the Cryptocurrency market. It will help improve the asset security of cryptocurrency exchanges, ensure the stable operation of the market, and make the cryptocurrency industry develop in a more stable and transparent direction.
However, asset security, management robustness, and user privacy protection of cryptocurrency exchanges need to be considered in the management process. The cryptocurrency market is still in its early stages of development, and its governance path still needs to be continuously explored and improved through the joint efforts of all parties.
6、Summary
Turkey spans across two continents in Asia and Europe, and its GDP ranking is also very high globally. In recent years, high economic growth has been accompanied by high inflation. The continuous rapid depreciation of the Turkish lira has exacerbated domestic economic turmoil and brought additional obstacles to the country’s economic stability. However, this has also accelerated the popularity and prosperity of cryptocurrency in the Turkey region. In terms of trading volume, Turkey is already the fourth largest cryptocurrency market, second only to the US, India, and the United Kingdom.
In addition, Turkey’s population size and geopolitical factors make it a very suitable place for practitioners from all continents to communicate and collide. A large proportion of people of all ages in Turkey are involved in the preservation and appreciation of cryptocurrency as part of their investment portfolio. Moreover, more and more young people are becoming interested in Web3 technology and industry, actively participating in technology learning and entrepreneurship.
With Web3 technology being used and shared by more people in the region, and the gradual implementation of regional regulatory policies, Turkey’s community active level, population size, and geopolitical factors determine that it will play an important role in the future development of the encryption industry. Turkey will also be a paradise for encryption practitioners.
MIIX CAPITAL gained a lot from this trip to Istanbul, made friends with practitioners from all over the world, and gained a full understanding of the development status of various tracks. Every time I meet a new friend, it feels like opening a blind box. The development of the encryption industry is really flourishing and thriving! Looking forward to seeing you next time in Turkey!
Note: All of the above opinions are not investment advice. If there are any inappropriate points, please feel free to leave a message to supplement or correct them.
Please follow and join the MIIX Capital community to share and exchange industry updates and to learn more about the latest developments in the field.
Twitter：https://twitter.com/MIIXCapital
Telegram EN：https://t.me/MIIXCapitalEN
Telegram CN：https://t.me/MIIXCapitalcn
