‘No internet, no mining’: why the riots in Kazakhstan have caused the value of bitcoin to plummet

The year got off to a turbulent start in Kazakhstan, the ninth largest country in the world. The drastic rise in fuel prices has caused popular revolts and a complicated political situation that has had one last consequence: the internet cut across the country last Wednesday.

This cut has not only had a clear impact on communications throughout the country or on access to all kinds of services, but also in the price of bitcoin, which is falling noticeably. The reason: Kazakhstan is today responsible for 18% of bitcoin mining according the Cambridge Center for Alternative Finance, and if the internet doesn’t work, those mining processes can’t be completed either. Due in part to this, the value of bitcoin is falling and has fallen to $ 41,270.

Kazakhstan is the second country in the world in bitcoin mining

China traditionally dominated the bitcoin mining segment, but the persecution that the Chinese government began months ago caused many miners to abandon that activity or move. The United States is now “the great producer” with a 35.4% share, but curiously the second most relevant country in bitcoin mining is Kazakhstan, which has an 18.1% share (a year ago that share was 8%) and is even ahead of Russia according to expert data.

The turbulent situation the country is going through has caused President Kassym-Jomart Tokayev to request the help of Russian military forces, but also to have ordered the national telecommunications provider to prevent internet access.

According to Kevin Zhang, a manager at cryptocurrency firm Foundry, that internet shutdown provoked that approximately 15% of miners will go offline, because precisely that is the amount that carry out this activity from Kazakhstan. What explained a Kazakh bitcoin miner on Twitter, “Without internet there is no mining.”

The growth of cryptocurrency mining in Kazakhstan has had a clear impact on its energy consumption. The body that regulates consumption there, called KEGOC, indicated that in the first nine months of 2021 consumption grew 11.8%.

That put in place measures to limit the consumption of new facilities and the requirements of mining, which, as Zhang explained “They haven’t made it illegal, they just want to limit it because it’s growing so fast“A new amendment in Kazakhstan was implemented this January 2022 and requires paying 0.23 cents more per kWh.

The increase in the price of fuels that has caused riots throughout the country and that has caused internet cuts has therefore made mining activity canceled in Kazakhstan. The country was a clear destination for miners moving from China: it borders China and is one of the largest energy producers in the world.

That in turn has caused a drop in the computing power dedicated to that mining, and is one of the reasons why in the last hours the value of bitcoin has fallen to $ 41,270 according to CoinMarketCap, although at the moment that value is around $ 42,300.

According to CNBC in Kazakhstan, internet access has already begun to be restored, but data from the NetBlocks Internet Observatory reveal that levels of connectivity are 5% of normal.

Via | CNBC