Kazakhstan is a stronghold in terms of bitcoin mining. It would even be the second largest producer in the world after the United States. So when the president decides to shut down the Internet in response to the riots that have rocked the country since the start of the year, it’s no wonder cryptocurrency is plummeting.
Bitcoin begins the year 2022 with a drop of more than 10% on the first sessions of the year. The fault with the last minutes of the meeting of the American Federal Reserve (FED)… and with the crisis in Kazakhstan ?
No internet, no bitcoin
Since January 2, there has been chaos in the second biggest Bitcoin miner country. Violent riots broke out after the sudden rise in the price of gas, leaving “ten” dead and several thousand injured.
Faced with popular protest, President Kassym-Jomart Tokayev decided to cut Internet access, leaving Bitcoin miners speechless.
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“And as the internet was shut down on Wednesday, the global computing power of bitcoin has collapsed quite dramatically. “, explains Tom Wilson, Archyde.com cryptocurrency correspondent.
The exodus of minors
It has not been that long since Kazakhstan shines in the bitcoin market. It all started when China decides to fight against mining and cryptocurrency transactions.
Many minors have therefore left China for other countries, including Kazakh territory. “There has been a real exodus of minors to Kazakhstan“, confirms Camille Baudoncq, lawyer at Eubelius.
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This choice cannot be explained by chance. The miners were looking for countries where electricity was cheap. This is the case in Kazakhstan where coal is one of the main sources of electricity. “It is also very cold, which makes it possible to cool all these machines.“, adds Camille Baudoncq.
Note that for all these reasons, Chinese minors are not the only ones to have settled in Kazakhstan.
In August, Kazakhstan accounted for about 20% of the global bitcoin computing power
This is how Kazakhstan became a stronghold for bitcoin. “A report from the University of Cambridge last year showed that in August, Kazakhstan accounted for around 20% of the global bitcoin computing power. This figure is up from 8% in April, which means the number of cryptocurrency miners in Kazakhstan has grown quite rapidly.“, analyse Tom Wilson.
FED declarations
However, this fall in Bitcoin should not be reduced to the riots hitting Kazakhstan alone. This would be a big shortcut.
“The riots have had an influence on the price of bitcoin with a drop of 5%“, confirms Camille Baudoncq. But according to her, the recent announcements of the US Federal Reserve play a major role in the current health of bitcoin.
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Indeed, the publication of the minutes of the last meeting of the FED indicates that US interest rates could be raised earlier than expected. If these rates go up, investors will tend to abandon riskier investments, such as in cryptocurrencies.
Reliable currencies were also affected by these announcements.
These announcements did not fail to shake up traditional markets. “Reliable currencies, in other words fiat currencies, were also affected by these announcements.“, she would like to recall.
A geopolitically sensitive currency
This event reminds us of the volatile nature of this virtual currency, which risks being even more so.
“So far, bitcoin has not really been affected by the same geopolitical factors that can affect other asset classes, be it stocks, bonds, commodities, etc. But since the start of last year, bitcoin has imposed itself on the investors’ agenda.“, remark Tom Wilson.
The attitude of governments and financial regulators towards cryptocurrencies can have a real impact on the markets
“It is still unclear to what extent geopolitical factors influence this phenomenon. But what happened recently in Kazakhstan, and China’s broader crackdown on cryptocurrency last year, shows that the attitude of governments and financial regulators towards cryptocurrency can have a real impact on the markets. cryptocurrency“, concludes the correspondent.