Since the beginning of 2025, the Turkish lira is one of only two global currencies to have depreciated against the US dollar.
However, it showed some stability after the Central Bank of the Republic of Turkey (CBRT) increased interest rates. CBRT President Fatih Karahan recently mentioned plans to accumulate reserves, indicating that the high-interest rate policy will continue for some time to boost US dollar reserves.
Understanding Carry Trade
The concept of Carry Trade, often associated with urban legends involving Japanese housewives, becomes more relevant in such situations. Essentially, this involves taking a loan in a low-interest currency and investing in a high-interest currency to gain profits from the interest rate difference and currency fluctuations. Large scale investors can potentially earn significant profits, for instance, a 5% profit on a billion-dollar investment yields $50 million. This approach is drawing investment into Turkey, thanks to the CBRT’s high-interest policies.
Exploring Crypto-Based Carry Trade
The question arises: can we engage in Carry Trade using our cryptocurrencies? Absolutely! Crypto inherently represents freedom. Begin by opening an account on BinanceGlobal. In this article, we will demonstrate how to use Binance Loans by leveraging Ethereum (ETH)
$2,507as collateral, and calculate the potential Turkish lira carry trade income.
By placing ETH as collateral and obtaining a USDC loan, Binance Global offers an immediate loan of up to 78% of the asset value at an annual interest rate of 5.86%. If the loan reaches 85% of the collateral’s value, a margin call is issued; at 91%, Binance liquidates the collateral and automatically closes the loan.
While the ETH is frozen as collateral, Binance Global Earn offers an annual 1.33% ETH interest rate. Using the loan, we can invest in Turkish lira and achieve annual growth up to 60% from market funds. However, it’s crucial to consider the depreciation of the Turkish lira in these calculations.
Assuming a model portfolio built with Ethereum at $2,000 per unit with 50 ETH, the total worth would be $100,000. Under a “Perfect” scenario where all prices remain stable, we’ll receive 1.33% interest on $100,000 ETH while paying 5.86% interest on a $78,000 USDC loan. For a scenario where USD/TRY depreciates by 30% in a year, while prices remain stable, the profitability is evident. By understanding these uncertainties, investors can evaluate their risk appetite and use Binance Global’s Binance Loans feature to maintain their cryptocurrency investments while capitalizing on high-interest rates offered by the Turkish lira.
Pondering the Risks Involved
- The risk of ETH/USD value dropping, triggering a margin call and resulting in liquidation.
- Unexpected depreciation in USD/TRY, surpassing potential interest gains.
- A faster-than-expected drop in Turkish interest rates resulting in lower-than-anticipated yields.
In a perfect scenario where crypto prices rise, further enhancing returns, it could seem too good to be true. Ultimately, even with current risks, investors have an opportunity to utilize their held cryptocurrencies to benefit from the substantial interest rates on offer.
