The merits of inferior money: The Turkish lira, short selling and buyback narratives in the cryptocurrency world.

Author: CryptoVeda; Source: X, @thecryptoskanda

I first heard about "Gransing's Law" in middle school:

Under the condition that the legal tender exchange rate remains constant, the currency with lower actual value (bad money) will drive out the currency with higher actual value (good money), causing the market to be flooded with bad money. This is what we often call "bad money drives out good money."

But at the time, I thought: Since the free market is based on supply and demand, if bad money can drive out good money, doesn't that mean bad money is more powerful?

After starting work, I realized that this is essentially determined by **position + microstructure**. In the workplace: In grassroots teams, sycophants and slackers drive out hard workers. Because in a microstructure lacking complex KPIs, the manager's management costs are lowest. In DEXs: Speculative new coins eliminate long-cycle projects. Because for DEXs, transaction fee revenue is paramount, and directly creating speculative events through MMs and conspiracies is the lowest cost and highest efficiency. In currency circulation: Everyone wants to exchange low-cost currency for equivalent goods. Due to legal tender status and information asymmetry, inferior currency floods the market because it has the best cost and circulation efficiency. In a goal-oriented microstructure, "inferior currency" has advantages that "good currency" cannot match. Where did the good coins go? They weren't eliminated; they were **collected**, withdrawn from circulation, and became stores of value. Therefore, the issue is never about superiority or inferiority, but rather: Transactional currencies vs. Stores of Value Currencies. The latter are few and far between worldwide: **Gold, Bitcoin**. This is consensus, it's a religion. Almost all other currencies are the former—including fiat currencies and cryptocurrencies. Some argue that altcoins have zero value and shouldn't exist. But according to this logic, there's no need for the more than 190 fiat currencies globally; the US dollar would suffice. The fact is: many non-US currencies are doing very well—they have depreciated in the long term, but speculative trading volume is huge and continues to grow. The most typical and also the most magical example is the Turkish Lira (TRY). The Turkish Lira is a magical fiat currency: extremely high central bank interest rates, explosive inflation, and stable depreciation. 2025 data: Annualized deposit return approximately 56.7%; inflation approximately 31%–34%; annual depreciation against the US dollar approximately 21%; implied volatility 26%.

The Lira is the most profitable asset for global arbitrage trading

This "junk asset" is a favorite of large institutions such as BlackRock and JPMorgan Chase. The core strategy is Carry Trade:

1. Borrow: Borrow low-interest, highly liquid safe-haven currencies (such as the Japanese yen and Swiss franc). Buy: Exchange for lira, capturing the 50%+ interest rate differential. Defend: Hedging exchange rate risk through swaps or volatility management. Why this monetary policy? Because Turkish ruler Erdogan firmly believes in unorthodox theories: high inflation stems from high interest rates. His operations have gone through three stages.

   2018-2022:

   During this period, Turkey, against the backdrop of high CPI and high inflation, insisted on low interest rates, sacrificing the exchange rate in exchange for autonomy

   2022-2023:

   Ethiopia tried to "have it all": it wanted a low exchange rate (independence policy), but didn't want the exchange rate to collapse and cause social unrest (fear of social instability), and didn't dare to implement comprehensive capital controls like China (fear of credibility collapse).

   The only means was to "policy-ize" or "Ponzi scheme" the entire banking system.

   The result was a setback, leading to even higher inflation (inflation became completely uncontrollable by the end of 2023).

   Taxes, raw materials, and labor settlements create a flywheel of lira buying

2. Foreign exchange protection tools such as KKM lock up exchange demand

Turkey, knowing it cannot stop the devaluation, simply does not close the capital account, but instead uses extremely high interest rates to attract carry trade.

Turkey, knowing it cannot stop the devaluation, simply does not close the capital account, but instead uses extremely high interest rates to attract carry trade.

Although it is a "high-beta interest rate asset in global financial assets," its **huge trading volume** brings a liquidity premium, preserving government debt issuance and fiscal functions. The lira is by no means a failure: a currency with "high trading volume but depreciation" is far better than a currency that "no one dares to touch and is directly ineffective." In conclusion, the main reasons the Turkish lira (currently) can survive are: High interest rates attract carry trade; the central bank manages volatility, making it predictable; and the genuine demand arising from the lira's exchange rate characteristics themselves. Implications for Cryptocurrency Trading and System Design

Similarities between the Lira and Crypto

Those with insight should have noticed by now that the Lira is highly similar to many cryptocurrencies: - Unstoppable inflation (caused by monetary policy vs. by token structure); - Natural downward price pressure due to inflation.

Regardless of the period, Turkey's monetary policy is **not aimed at stabilizing the exchange rate**, but rather at ensuring liquidity and government financing capacity.

Similarly: Any cryptocurrency project without full circulation cannot maintain its price in the long term, let alone increase it. Any long-term, one-way, fixed-ratio buyback that can be anticipated in advance is unlikely to succeed.

Looking at the Crypto Revenue Buyback Narrative from the Central Bank of Turkey

The story of 100% revenue buybacks by Hype, Pump, etc. sounds appealing, creating the illusion for holders that "prices are supported by real revenue."



Protocol revenue buybacks are by no means a panacea


But the reality is: arbitrage funds can hedge in advance, and buybacks actually consume funds and offset price impacts.

Protocol revenue buybacks are by no means a panacea


But the reality is: Arbitrage funds can hedge in advance, and buybacks actually consume funds and offset price impacts.

There must be continuous revenue (financial protocol / top L1):

• The token has an unavoidable "tax" function (Gas, transaction fees);

• Provide a coin-based interest rate scissors difference higher than the opportunity cost + lock-up conditions;

• Protocol revenue forms a "central bank-style treasury," committed to being used only for intervention in token price, but not for mechanical, predictable one-way buybacks;

• Based on IV/RV/depth/funding rate management and ensuring a hedging volatility structure.

• Tokens will depreciate due to foreseeable inflation, but arbitrage funds will flow into contracts, lending, and derivatives, creating ample liquidity. If these tools are within the protocol, transaction fees can even feed back into the national treasury, creating a flywheel effect. Yes, this is another "dividend-sharing Ponzi scheme" structure, using dividend APY and lock-up to increase sunk costs, triggering arbitrage behavior through interest rate differentials and foreseeable fluctuations, increasing liquidable assets and pumping funds, which are then reinvested into the national treasury to further increase the APY flywheel. The key to this structure lies in whether the system continues, whether the project can continuously generate revenue, and whether lending rates remain at a controllable level. The crypto world has fewer variables and doesn't require the same accountability for votes as the Sultan of Egypt. You can build a carry trade system that's even more powerful than the lira. Exchanges will love you, liquid funds will love you. Although the holder doesn't like you, that's the crypto market. We gave you a chance, so you can't call me a bad guy. I'm just not the most orthodox kind of good. In the crypto world, short selling can indeed make money. Actually, we just answered a traditional crypto myth: "No one can make money by short selling." Short selling in the US stock market is difficult because: Mathematically, the returns are capped. Long-term structural bull market. But the crypto market is different. The vast majority of projects cannot reverse the trend. Without an entire financial system and "macro-level reflexive tools," changing unlocking mechanisms or policies is useless, and it's impossible to cause an instant price trend reversal like the Turkish central bank's policy change. Most of the time, it's just "sell the news" and the price continues to fall. Dumping is free, pumping is. Of course, this is mainly reflected in large-cap, highly liquid coins, where reversing the trend is very difficult and requires a large number of counterparties to be worth trying—dumping is free, pumping is. The real risk of shorting: The real risk of shorting large-cap coins doesn't come from the project itself, but from the trading counterparties. Your short-selling strategy is based on the assumption that "the bulls don't have enough funds to squeeze the shorts." But what if the exchange suddenly changes its rules, causing extreme changes in funding rates or a sudden withdrawal of bullish liquidity? One possibility is that fees will wear you down, and another is that it effectively reduces the cost of a short squeeze. This is a common problem with all CEXs and orderbook-type PERP DEXs, including Hyperliquid and Lighter. The XPL pre-market and MMT are excellent examples. In this situation, what's needed is a trading venue with unlimited counterparties, similar to JLP (Junior High Level). You might still encounter ADL (Advanced Trading Limits), but due to the trading principles of JLP, the chance of encountering tail risks like those in MMT will be greatly reduced.