The second is the production of digital currencies... What does Kazakhstan have to do with the collapse of Bitcoin prices?
The bitcoin mining industry in Kazakhstan, the world's second-largest producer after the United States, has been hit by a severe disruption for a second day due to internet outages across the country amid widespread protests, sending prices crashing by more than 12%.
Kazakhstan entered its new year on the impact of popular anti-government demonstrations, first sparked by the government's hike in LNG prices, which began in the west of the country over the weekend and spread rapidly through cities across the country.
In the wake of the popular protests that are developing towards violence and killing, the internet was cut across the country last Wednesday. Although the intent seemed to be to disrupt the protesters’ communications, the effects of the blackout spread more and began to affect the prices of the cryptocurrency Bitcoin, which took a major hit and lost more than 12% of its value.
According to the Cambridge Center for Alternative Finance, Kazakhstan last year became the world's second-largest center for bitcoin mining after the United States, after the main hub in China imposed restrictions on crypto-mining activity.
2nd in the world:
Last August, Kazakhstan had 18% of the global "hash rate" (nearly one-fifth of global production), a term used in cryptography to describe the amount of computing power used by computers connected to the Bitcoin network, after it was in April 2021, Before China's latest crackdown on Bitcoin mining, only about 8%.
Kazakhstan witnessed a large influx of bitcoin mining companies after its neighbor China banned bitcoin mining last year, making it second in the world after the United States in mining and producing the cryptocurrency bitcoin.
According to the Financial Times, nearly 90,000 mining companies have moved to Kazakhstan after being expelled from China last year.
Because of its pivotal role in the global Bitcoin mining network, the nationwide internet outage has led to a sharp setback in the price of the cryptocurrency Bitcoin. “It seems that the internet is down across Kazakhstan, so no miner can connect to the mining pools,” Alan Dordjiyev, head of the Kazakh National Association of Blockchain and Data Center Industry, told CoinDesk on Thursday.
Impact of events on Bitcoin prices:
Although Bitcoin and other major cryptocurrencies fell sharply on Wednesday amid concerns that the US Federal Reserve may raise interest rates sooner than expected, recent events have had a bigger impact on cryptocurrency prices, specifically Bitcoin.
Within hours of a nationwide internet outage and the inability of bitcoin miners in Kazakhstan to access the bitcoin network, bitcoin's computational power sank, leading as of Thursday to a 12% drop in the bitcoin network's hash rate.
The fact that a lower hash rate caused by some miners withdrawing from the network theoretically makes it easier for the remaining miners to produce new currency, but that does not necessarily mean that Bitcoin prices will rise. Despite a 14% drop in the hash rate from Tuesday to Thursday, according to data from miner BTC.com, the cryptocurrency fell to nearly $41,000 on Friday morning, testing its lowest levels in several months, which confirmed the amount of weight. Which Kazakhstan holds in the Bitcoin ecosystem.
Cryptocurrency mining:
Bitcoin and alternative cryptocurrencies are created or “mined” using high-powered computers, sometimes placed in information centers in many components of the planet, capable of solving complex mathematical puzzles in a very energy-intensive way.
The more miners are on the network, the more computer power is required to mine new bitcoins, and the hash rate drops if miners withdraw from the network, theoretically making it easier for the remaining miners to produce new coins.
In Kazakhstan, mining mines are mostly powered by old coal plants that, along with coal mines and entire cities built around them, are a nuisance to authorities in their quest to decarbonize the economy, which said last year it planned to crack down on unregistered "gray" miners who You estimate that they may use twice as much energy as "whites" or officially registered.
For its part, the Kazakh Energy Ministry indicated last year that "gray" mining could consume up to 1.2 gigawatts of energy, with 600 megawatts of white miners amounting to about 8% of the total generation capacity in Kazakhstan.