The political revolt in Kazakhstan, the internet cuts and the difficulties of supplying electricity supply in the former Soviet republic have caused, as a collateral effect, a collapse in the price of cryptocurrencies. Kazakhstan is the second country in the world, behind the US, in cryptocurrency mining.
In particular, the Central Asian country represents around 18% of the world production power of bitcoins. Hence, the political tension that has exploded strongly in recent days has contributed to a collapse in the global price of bitcoin, which has fallen below $ 43,000 (far from the record of $ 69,000 in early November). . The Kazakh political revolt is not the only cause. Analysts also point to the publication of the acts of the US Federal Reserve which suggest that interest rates could rise earlier than expected, thus curbing investors’ appetite for riskier assets. However, according to the websites specialized in cryptocurrencies, the disruption in the development of cryptocurrencies due to the internet blackout in Kazakhstan has become a determining factor for the loss of value of bitcoin.
Bitcoin and other cryptocurrencies are developed or ‘mined’ by high-powered computers, generally in data centers in different parts of the world, which compete to solve the mathematical encryption formulas in a process that consumes enormous doses of electrical energy.
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Kazakhstan became the second world power for bitcoin mining after the United States in 2021, according to the Cambridge Center for Alternative Finance. After China – which was the main center – cracked down on cryptocurrency mining activity, a large part of the developers settled in Kazakhstan. These companies and their ‘farms’ – multiple computers connected to each other, sharing the same space to create or “mine” cryptocurrencies – migrated to the former Soviet republic. In August, Kazakhstan accounted for 18% of the world’s ‘hasrate’ (jargon used to designate the amount of computing power used by computers connected to the bitcoin network). The US has a mining rate of 35.4%, and Russia, 11.3%. This Thursday, coinciding with the worsening of the political unrest and the cuts of electricity supply and the Internet, the Kazakh hasrate fell from 18% to 14%, according to data from the mining company BTC.com cited by Archyde.com.
Kazakhstan’s crypto mining farms are primarily powered by coal plants aging that, along with the coal mines and entire towns built around them, are a serious inconvenience for authorities seeking to decarbonize the economy. The government last year announced its decision to take action against unregistered ‘miners’, who could be consuming twice as much energy as legal ones.
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