Bitcoin Plunges Amidst Violence in Kazakhstan

By Todd Crawford | January 7, 2022
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PARIS, FRANCE - OCT.21: In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is on display in front of the Bitcoin course's graph on Oct. 21, 2021 in Paris, France. (Image: Chesnot/Getty Images)

According to the Cambridge Centre for Alternative Finance, in 2021, Kazakhstan became the world’s second-largest bitcoin mining center just after the United States. 

Kazakhstan saw a significant increase in bitcoin mining activity following China’s crackdown last year on crypto mining. Miners quickly adjusted their approach, relocating their mining rigs to countries like Kazakhstan that are rich in natural resources and afford miners cheap electricity pricing.  

Bitcoin, which runs on blockchain technology, requires massive amounts of energy to power the computers required to mine the coins. Data centers around the globe compete to solve complex mathematical puzzles in an energy-intensive process. Kazakhstan, an energy powerhouse, provides the ideal location for bitcoin mining. 

Prompted by nationwide unrest Kazakh authorities shut down the internet for the entire nation on Wednesday Jan. 5.

Within hours of shutting down the nation’s internet, bitcoin’s computational power sank. 

In the early hours of Jan. 5 bitcoin was trading at $47,080.97 per token. By the end of the day bitcoin had shed $4,491.54 of value, trading at just $42,589.43. As of Jan. 7 the coin hit a low of $41,271.15 before recovering slightly to $41,963.91. Bitcoin is at its lowest level since last September. 

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The internet outage in Kazakhstan has shut down a fifth of the entire bitcoin network. In August of last year Kazakhstan accounted for more than 18 percent of the global bitcoin hashrate, a rate that has grown since.

As violence continues to plague the nation it is unclear when internet services will be restored. According to internet monitor Netblocks, the nation has been experiencing an internet outage in excess of 36 hours as of Friday morning. 

Protests began over soaring fuel costs but quickly evolved into public fury aimed at the ruling party that has been in power since 1991 when the nation gained its independence from the Soviet Union.  

Despite the nation’s vast fossil fuel wealth it had been struggling to cope with huge demands on its energy grid due to the rise in crypto mining. The Financial Times reported in November last year that power shortages in the country led to a major crypto mining farm being shut down.