The Turkish financial markets experienced extreme turbulence following the arrest of Istanbul Mayor Ekrem İmamoğlu, a major political challenger to President Tayyip Erdogan. This unexpected political development caused the Turkish lira to plummet sharply, leading to a surge in cryptocurrency trading as investors scrambled for alternative stores of value.

USDT/TRY Pair Sees Unprecedented Swings

Binance’s USDT/TRY trading pair recorded its most volatile session since April 2024

The impact of İmamoğlu’s detention was immediate. The Turkish lira suffered a dramatic decline, plunging to an all-time low of 42 against the U.S. dollar, marking a staggering 12.7% drop. In response, crypto traders rushed into stablecoins, triggering heightened volatility in Binance’s USDT/TRY trading pair, which saw a 6.4% increase in price swings—its highest level in nearly a year.

BtcTurk and Paribu, Turkey’s leading cryptocurrency exchanges, also witnessed a surge in trading volume, jumping 23.4% and 18.8%, respectively, as investors sought to hedge against the lira’s instability. This trend mirrors previous periods of political and economic turmoil in Turkey, where crypto has often served as a safe haven amid financial uncertainty.

Stock Market Plummets Amid Currency Crisis

Borsa Istanbul’s key indices suffer their worst losses in over a year

While crypto activity surged, Turkey’s traditional financial markets faced a brutal sell-off. The Borsa Istanbul 100 index (BIST 100) tumbled nearly 6%, marking its worst daily decline since 2023. Banking stocks were hit even harder, with the banking sub-index plunging almost 10%, prompting a temporary halt in trading as authorities attempted to prevent further losses.

To counteract the lira’s rapid depreciation, the Turkish central bank reportedly offloaded between $5 billion and $10 billion in foreign exchange reserves in a desperate bid to stabilize the currency. While such interventions may offer short-term relief, analysts warn that they could further deplete Turkey’s already strained FX reserves, raising concerns about the country’s long-term economic stability.

Political Crackdown and Opposition Backlash

İmamoğlu’s arrest sparks outrage as critics call it a “coup attempt”

On the morning of March 19, Turkish authorities arrested Istanbul Mayor Ekrem İmamoğlu, accusing him of having links to terrorist organizations. The opposition Republican People’s Party (CHP) denounced the move as a “blatant attempt to eliminate political competition”, particularly as İmamoğlu was widely seen as a top contender for the 2028 presidential elections.

According to Turkey’s state-run Anadolu Agency, prosecutors also issued arrest warrants for approximately 100 individuals, including İmamoğlu’s close aide, Murat Ongun. In response to rising tensions, authorities sealed off key roads in Istanbul and imposed a four-day ban on public demonstrations to prevent mass protests.

Human Rights Watch’s Emma Sinclair-Webb condemned the arrest, stating that it was part of a wider campaign of politically motivated prosecutions designed to weaken Erdogan’s opposition.

Social Media Disruptions and International Backlash

Internet monitoring agencies confirm widespread social media restrictions

Following the high-profile arrest, Turkish citizens reported widespread access issues on major social media platforms, including X (formerly Twitter), Instagram, YouTube, and TikTok. The restrictions were later confirmed by NetBlocks, an independent internet watchdog, which stated that the Turkish government had intentionally throttled access to multiple platforms in an effort to curb political dissent and prevent protests from spreading online.

The international response was swift. Germany’s Foreign Ministry labeled the arrest a “serious setback for democracy” in Turkey, with spokesperson Sebastian Fischer emphasizing that the move was part of an ongoing effort to silence opposition figures. Deutsche Welle also reported that European officials viewed the development as a warning sign for Turkey’s political stability.

What’s Next for Turkey’s Economy?

Market uncertainty threatens economic recovery efforts

In recent months, Turkey’s central bank had taken steps toward implementing more orthodox monetary policies, aiming to restore investor confidence and attract much-needed foreign capital. However, with the latest political upheaval, those efforts now appear in jeopardy, as international investors grow increasingly wary of Turkey’s unpredictable political landscape.

Many analysts fear that continued political instability, capital flight, and lira depreciation could undermine Turkey’s long-term economic outlook, making it harder to secure foreign investment—a crucial component of the country’s recovery strategy.