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Since the beginning of 2022, international news has revolved a lot around Kazakhstan. The country is indeed going through a period of significant instability. As the specter of a new cold war resurfaces, economic markets are skittish. In particular, the Bitcoin price seems affected by the geopolitical issue in Kazakhstan. But what exactly is the relationship between Kazakhstan and Bitcoin?
Kazakhstan: A tense geopolitical context
Before talking about Bitcoin, it is good to briefly resituate the context and the situation in Kazakhstan. Since the start of 2022, the country has experienced the largest wave of protests since its independence on December 16, 1991. What are the reasons?
Former President Nursultna Nazarbayev is accused by his people of having taken advantage of his supreme position (held for 30 years) to enrich his family. The population continues to display its distrust of the current government because he is suspected of still being under the influence of the former president. In such a context, the fuel price increases were the spark that ignited the powder.
The situation is such that the country has implemented a state of emergency and a curfew. Many injuries and even deaths are to be deplored following the demonstrations and the response of the police. At the same time, nearly 8,000 people are currently detained throughout the country according to figures from the Ministry of the Interior.
To “help” restore peace, the Russia recently sent troops to the country. What is being played out unfortunately fools no one and looks like a latent cold war.
In this more than tense climate, the internet network has experienced many cuts in the country. Internet is regularly cut in Almaty, the former capital of the country. This is not without consequences for Bitcoin…
Bitcoin mining in Kazakhstan
As electronic money, it goes without saying that Bitcoin needs the internet. A Bitcoin network without the internet would be as problematic as a fiat currency without paper and copper!
However, Kazakhstan plays an important role within the Bitcoin ecosystem. Indeed, the country is a major player in bitcoin mining. As a reminder, mining is an activity that consists of creating or circulating new bitcoins on the network. The country thus has “mining farms” which are centers housing hundreds of supercomputers connected to mine Bitcoin. Without internet, mining cannot take place.
However, in the current situation, the internet network is more precarious in the country. For example, according to Netblocks data, total connectivity in the country was only 5% on Friday, January 7, 2022. The situation has led some major mining players in the country to expatriate. Besides, a Spanish MP recently questioned the government to attract part of this mining industry into exile.
Prior to these events, Kazakhstan alone accounted for approximately 18% of total power (called hashrate) used around the world to create bitcoin. Along with the United States, Kazakhstan was the country that benefited the most from the exile of miners from China in 2021. Therefore, it is not surprising to understand the impact of the situation in Kazakhstan on Bitcoin at the World level. Several mining companies like Antpool or Binance have seen their hashrate lose between 12 and 16 points in recent days. Furthermore, the global hashrate is down 5% compared to its (record) value of January 7. Of course, it remains difficult to attribute this decline solely to the situation in Kazakhstan.
Under such conditions, it is not surprising that the price of Bitcoin is impacted and plummets. At present, the dynamic is not good. The price of BTC is down more than 6% over the last 7 days.
While Bitcoin has resisted for a long time not to go down below $45,000 at the end of 2021, he finally gave in at the start of the year. As a reminder, the ATH of Bitcoin (its maximum price) was reached on November 10, 2021 with a price of $68,789.
However, we should not summarize the bitcoin bearish situation and from the crypto market to the only situation in Kazakhstan. The increase in inflation, the establishment or simply the evocation of strong regulations on cryptos and of course the health situation also contribute to the depression of the crypto markets.
Despite the context, many analysts expect the market to improve over the course of the year. If it was mentioned in 2021, the objective of a Bitcoin at $100,000 is still possible in 2022. Recently, the bank Goldman Sachs (just that) has also mentioned this target.
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