Friday, January 07, 2022
Internet is paralyzed
Kazakhstan is making Bitcoin suffer
The unrest in Kazakhstan is depressing the Bitcoin rate. Because the electricity is suddenly running out, and the Internet is switched off. In the past year, the Central Asian country had become the new Mecca for the crypto community.
The state of emergency in Kazakhstan is affecting Bitcoin. The reason: The Central Asian country is one of the centers for so-called mining, that is, for “prospecting” the cryptocurrency. In view of the mass protests, the Internet has failed across the board, and the government has probably switched it off. In addition, there is a sudden shortage of electricity. The protests were triggered by an increase in fuel prices.
The aim of the shutdown is obviously to make communication more difficult for the protesters. But this step also has consequences for Bitcoin. The price of the cryptocurrency peaked today by five percent below 41,000 dollars, marking its lowest level in more than three months. In addition to the events in Kazakhstan, there is another reason for this: The US Federal Reserve will probably tighten its monetary policy more quickly than previously expected.
Last year, Kazakhstan was the second largest bitcoin producer after the US, according to data from the Cambridge Center for Alternative Finance. The production of new bitcoins requires powerful servers that consume a lot of energy. In addition, computing capacity is required for the encryption and validation of transactions. Those who do this are rewarded in Bitcoin. However, this is not possible without a connection to the Internet. Last August, 18 percent of the world’s Bitcoin computing power was provided in Kazakhstan.
Kazakhstan has become a hub for Bitcoin mining after China began cracking down on mining last year. The leadership of the People’s Republic had banned prospecting in view of energy shortages, and raids took place. Until then, around three quarters of all Bitcoin transactions had taken place in the People’s Republic.
Several miners then relocated to the neighboring country because electricity prices are low there and the government is leaving Bitcoin miners alone. The well-known miners Canaan, The9 and TAOP are now also active in Kazakhstan. Canaan has entered into strategic agreements with several crypto mining companies for joint business in Kazakhstan, it said.