“Dollarization vs. bitcoinization in Türkiye: Which is more dangerous for the financial market?”

• We analyze the effects of Bitcoin demand and dollarization rate on the Turkish financial market. • Neither Bitcoin demand nor the dollarization rate causes a financial crisis in Türkiye. • Bitcoin demand and the dollarization rate affect the financial market through different channels. • We find a bidirectional causality between Bitcoin demand and the banking sector. • We find a bidirectional causality between dollarization rate and the foreign exchange market. While bitcoinization and dollarization share similar theoretical economic definitions, their effects on the financial market differ. We employ a vector autoregressive model and Granger causality test to examine the causal relationships between Bitcoin demand, the dollarization rate, and the financial market in Türkiye. The results indicate that neither bitcoinization nor dollarization directly causes a financial crisis in Türkiye. However, when breaking down the financial market into its three components —the banking sector, the stock market, and the foreign exchange market — we find a bidirectional causality between bitcoinization and the banking sector, and between dollarization and the exchange market.