Turkey’s cryptocurrency nightmare worsened after a second exchange collapsed – stoking fears about bitcoin’s risks
The cryptocurrency market has been dealt a major blow in Turkey after a second exchange went down on Friday. The closures have left hundreds of thousands of people without access to bitcoin and other assets, which many had bought as a hedge against rampant inflation.
Analysts said the events were a reminder to cryptocurrency investors everywhere to be sure to do business with reputable companies.
Vebitcoin, a Turkish crypto exchange which had around $60 million in daily trading volumes, announced it had stopped all of its activities on Friday. It put a message up on its website blaming financial strains.
The Turkish financial crimes watchdog then blocked all the exchange’s bank accounts in the country later that day, according to the state-run Anadolu news agency.
Vebitcoin’s announcement came days after rival Turkish crypto exchange Thodex stopped operations and its founder fled the country. The exchange had around 390,000 active users, according to reports.
The abrupt closure of the exchange was one catalyst for bitcoin’s dramatic fall below $50,000 from recent highs close to $65,000, analysts said.
“The collapse of two exchanges in Turkey sent a warning to many cryptocurrency traders who have gotten into crypto with unreputable companies,” Edward Moya, senior market analyst at Oanda, said.
Turkey’s cryptocurrency woes have been tied up with government efforts to crack down on the market.
Last week the country’s central bank backed a ban on crypto payments. It said using cryptocurrencies for payments could cause “non-recoverable losses” for the parties involved.
But many Turks have turned to cryptocurrencies as a hedge against inflation, which stood at 16.2% in March.
“People like the idea of cryptocurrencies because they’re unconstrained by the government,” Marshall Gittler, head of investment research at BDSwiss, said. “But that freedom comes with costs – it also means there’s no insurance and limited regulation.”
Philip Gradwell, chief economist at Chainalysis, said: “The troubles at Turkish exchanges illustrate the importance of clear and stable regulation for cryptocurrency.”
He added: “Investors in the USA and Europe are fortunate to have reputable cryptocurrency exchanges that operate within a strong regulatory framework, so the events in Turkey should not reduce their confidence.”