In her monthly Expert Take column, Selva Ozelli, an international tax attorney and CPA, covers the intersection between emerging technologies and sust
In her monthly Expert Take column, Selva Ozelli, an international tax attorney and CPA, covers the intersection between emerging technologies and sustainability, and provides the latest developments around taxes, AML/CFT regulations and legal issues affecting crypto and blockchain.
Turkey — the cradle of civilization — is quietly digitizing despite its high-inflation economy, and the lira’s volatility might be correlated with the prices of Bitcoin (BTC) and Ether (ETH). During the fourth quarter of 2021, the TRY/USD exchange rate crashed from 9 to 18.5 liras per dollar in the six weeks leading up to mid-December before strengthening to as high as 10 liras and then falling back to 13.87 liras at the time of writing, rendering the currency a highly volatile asset.
The lira’s volatility stemmed from a contrarian interest rate cut made by Turkish President Recep Tayyip Erdoğan amid high inflation and against the advice of central bankers. High inflation tends to devalue cash and drive investors — including major professional and institutional investors alongside top hedge fund managers like George Soros — to invest their money in cryptocurrencies. With inflation soaring above 20%, Erhan Kahraman, news editor at Cointelegraph, told me that during 2021:
“Bitcoin and other cryptocurrency usage in Turkey increased elevenfold.”
Unexpectedly, the cryptocurrency market crashed during the first trading week of 2022, and as a result, Bitcoin and Ether — which rose 100% and 300% during 2021, respectively — entered bear market territory. The crash was blamed on a combination of three events.
The first event was the release of the minutes from the United States Federal Reserve’s December meeting. They hinted that the U.S. central bank would reduce its pandemic-era stimulus and begin raising interest rates sooner than expected. This news triggered a sell-off in the global stock markets that spilled over into the cryptocurrency markets, with Bitcoin’s price ultimately crashing over 40% from its all-time high set in November 2021. Similarly, Ether dropped over 13% after the news to as low as $3,300.
The second event was the anti-government riots in Kazakhstan, the world’s second-largest Bitcoin mining hub, which led to the country’s government being sacked and internet services shut down, leaving an estimated 13% of the world’s Bitcoin mining operations offline.
Related: Bitcoin miners’ resilience to geopolitics — A healthy sign for the network
The third event was the rapid worldwide spread of the Omicron variant of COVID-19, which wreaked havoc on long-term social and economic development by leaving millions sick and inundating healthcare systems that were already buckling under the cumulative toll of every previous surge. Reinforcing the idea that people shouldn’t live in constant fear of the virus, Ugur Sahin, the German-Turkish co-founder of COVID-19 vaccine maker BioNTech, highlighted that despite the virus being here to stay for a couple more years, the COVID-19 variants are becoming controllable, and that BioNTech is keeping its eye on new variants and new strains.
Nevertheless, the unexpected market crash was not enough to shake Turkish investors’ faith in cryptocurrencies being a hedge against a weakening lira and double-digit inflation.
The first-ever eco-friendly, secure cryptocurrencies
While Satoshi Nakamoto is credited with designing the first cryptocurrency, it was actually Turkish-American Emin Gün Sirer — CEO of Ava Labs, professor at Cornell University and co-director of the Initiative for Cryptocurrencies and Smart Contracts — who designed the first in 2003, six years before the launch of Bitcoin. Named “Karma,” it was based on a proof-of-work protocol.
Since 2019, Sirer has been focused on building Avalanche, an eco-friendly blockchain that uses a novel consensus mechanism for high-transaction throughput. As Sirer explained to me: “Avalanche is a high-performance, eco-friendly blockchain that scales hard math and science, rather than expensive, energy-intensive hardware. At its core, the innovation of the Avalanche consensus reduces the amount of communication required between validating nodes, which also decreases the hardware and power required to secure the many billions of dollars in value on the network. Taken a step further, Avalanche is a ‘quiescent’ protocol, meaning that if network activity slows, nodes will not perpetually expend energy as we see on almost every other platform. Nodes will simply wait until they hear another transaction to broadcast and move swiftly toward the next decision.” He added:
“Sustainability is critical to the blockchain industry’s ability to overtake traditional infrastructures, as well as a core ethic of this entire ecosystem of using innovation to better the lives of people.”
Sirer continued: “Much of the inertia that climate activists have faced is from incumbents who wield far too much power. Decentralizing…
cointelegraph.com