Published on : Modified :
The Internet shutdown decided on Wednesday in Kazakhstan in response to the protests against power suddenly wiped out nearly 15% of global bitcoin creation capacity. A sharp drop in the price of the main cryptocurrencies followed, but the causes of which are however more diffuse. Explanations.
Unexpected consequence of the crisis in Kazakhstan: the wave of concerns aroused among cryptocurrency holders, the main ones of which have been in free fall since Wednesday, January 5.
While on the ground the repression intensified against the demonstrators, whose protests began because of the increase in the price of liquefied petroleum gas (LPG), articles and messages multiplied on specialized sites and forums asking themselves “If the situation in Kazakhstan was going to worsen the plunge in the prices” of cryptocurrencies or “what effect this crisis could have on bitcoin”.
Second country for bitcoin mining
If these questions may seem out of place in the face of the security situation in Kazakhstan, where demonstrators risk their lives, this concern illustrates the importance that this small Central Asian country has assumed in recent months in the ecosystem of bitcoins and other dematerialized currencies. alternatives, highly prized by speculators. The proof: shortly after the Internet shutdown imposed on the whole country on Wednesday, more than 13% of the global bitcoin “mining” capacities evaporated (mining is the creation of cryptocurrencies thanks to intense calculations very energy-intensive computers).
This disappearance “provides definitive proof of what was supposed: Kazakhstan has indeed become the second most important country for the creation of cryptocurrencies. [après les États-Unis, NDLR]”, Emphasizes Fortune magazine.
“We have known since April 2021 that a drop in global ‘mining’ capacities can lead to a sharp drop in cryptocurrency prices, and this is what people also fear this time around”, recalls Nathalie Janson, economist and specialist. cryptocurrencies at the Neoma Business School management school, contacted by France 24.
In the spring of last year, Beijing decided to kick out of China the many ‘mining’ companies that had taken up residence there. This hunt for ‘miners’ – decided for environmental reasons and to favor the official Chinese electronic currency – had resulted in a drop of nearly 50% in the price of bitcoin in two months.
This forced exodus is also at the origin of the rise of Kazakhstan in this ecosystem. “These companies were looking for places where the electricity needed to run their many computers was not too expensive, and Kazakhstan – rich in oil and where energy prices are controlled – appeared to be the ideal candidate”, emphasizes The Block, a cryptocurrency market trend analysis company. More than 110 new “mining” companies had applied for authorization to settle in Kazakhstan between July and December 2021.
Tidal wave of bad news
But this time the situation is different. “However, we should not believe that the fall in prices since yesterday is directly linked to the cut-off of the Internet in Kazakhstan. These declines have much more to do with the decisions taken yesterday by the American Federal Reserve (Fed) ”, assures Vincent Boy, analyst at IG France, contacted by France 24. Jerome Powell, President of the Fed, has indeed announced, Wednesday, a tightening of US monetary policy. “This means the end of the context of free flowing money that had made it easier to take risks such as investing in cryptocurrencies,” explains Nathalie Janson.
This economist believes, however, that the crisis in Kazakhstan may have “accentuated the downward trend”. It is, in fact, “the first time that a geopolitical event directly and brutally affects an important player in this ecosystem. This may have shaken investor confidence, ”explains Nathalie Janson. The situation in Kazakhstan would, in this hypothesis, have served to reveal certain weaknesses that investors did not necessarily think of.
Especially since at the same time, the government of Kosovo decided to ban the “mining” of bitcoins in an attempt to save energy in a context of soaring gas prices. This small country is far from having the importance of Kazakhstan on the cryptocurrency map, but “’mining’ was becoming more and more popular there, especially in the north of the country among young people”, explains the British BBC.
Between the Fed, Kazakhstan and Kosovo, it is therefore a kind of tidal wave of bad news that has hit cryptocurrency. However, it is impossible to know precisely to what extent the events in Kazakhstan contributed to the fall of bitcoin because “we have no precedent for comparing the curves,” notes Nathalie Janson.
On the other hand, it will be interesting, according to her, “to see how quickly these ‘mining’ companies will find an alternative to resume their activities”. This ability to bounce back quickly or not is also a point that intrigued Vincent Boy, the analyst at IG France. For him, this crisis can be considered as the first “life-size test of the reaction of players in this ecosystem and investors to a brutal and unexpected event”.