- Soaring inflation led Turks to turn to USDT to limit their losses.
- Russians sought refuge in USDT amid the short-lived Wagner rebellion.
Lately, the demand for popular stablecoin Tether [USDT] in countries going through financial and political strife has risen. One can observe not just the bankable aspect of the digital asset but a general shift in sentiment towards cryptocurrencies.
Why stablecoins
Stablecoins have been found to be beneficial for countries going through economic turmoil. As the native currency undergoes massive devaluation, people look to convert their savings to safe-haven assets like the USD.
While the conventional methods of exchange like commercial banks and online forex services could be time-consuming, the crypto derivatives of USD, stablecoins, turn out to be a convenient option.
USDT was the third-largest tradable digital asset at press time with a market cap of more than $83 billion, as per CoinMarketCap data. It was also the most liquid cryptocurrency with a trading volume of $23.9 billion in the last 24 hours, more than that of Bitcoin [BTC]
Turkey embraces USDT
The Turkish lira (TRY) experienced a significant downtrend over the past few years, compounded by President Recep Tayyip Erdogan’s unorthodox policies on interest rates. According to Statista, 1 USD was equivalent to 23 TRY as of 21 June. This was a threefold jump from the time of Covid-19 crisis when 1 USD was roughly equal to 7 Lira.
After Erdogan came back to power in May, concerns about a further rise in inflation strengthened. This reignited the interest for cryptos, especially stablecoins. As per crypto market data provider Kaiko, USDT hit a 56% market share on BtcTurk PRO, one of the largest crypto exchanges in Turkey, during the last week of May.
The dominance has continued as the USDT-TRY pair was the most active on the trading platform in the last 24 hours, accounting for 18% of the total volume.
The case of Russia
The Russian Wagner mercenaries’ short-lived insurrection against President Vladimir Putin’s authority was one of the most extensively followed international events last week. Though the private militia has retreated, concerns of a civil war and financial instability drove anxious Russians to seek refuge in the world of digital assets.
According to a report by blockchain analysis firm CCData, daily trade volume between Russia’s official currency Ruble and Tether [USDT] spiked to $15 million on 24 June, representing a jump of more than three times from the previous day figures.
This was the time when the Wagner group began to advance rapidly towards the capital Moscow. Tensions over a catastrophic civil war were at their peak among Russians during this period.
Source: CCData
The report highlighted that the surge in USDT-denominated trading didn’t decisively mean that people were buying the stablecoin. But rather it was a move to increase their exposure to USD. USDT is the largest stablecoin by market cap and is pegged 1:1 with the USD.
Inflationary pressure has been on the rise in Russia after it was hit with punitive economic sanctions following the full-blown invasion of its western neighbor Ukraine in early 2022. A separate analysis by Kaiko showed that the Ruble-USDT trading volume breached $30 million per day around the time of the invasion.
While inflation has cooled off significantly since then, Ruble continues to be weak against the USD, with 1 USD being equivalent to 85 Russian Rubles at the time of writing, as per Bloomberg. In April 2023, the Ruble fell to its lowest value against USD in a year.
Source: Kaiko
